2024 has not been kind to Tesla (TSLA +2.40%) stock. Since the year began, a combination of weak demand for electric cars generally, combined with price cuts by Tesla in particular (designed to fix the weak demand problem), have cost Tesla more than one-third of its market capitalization.
And one analyst thinks things will get worse.
NASDAQ: TSLA
Key Data Points
Is Tesla stock a sell now?
On Tuesday, Tesla bear Gordon Johnson of GLJ Research set a new, lower price target of just $22.86 on Tesla stock -- currently the lowest price target on Wall Street. That target implies an 85% downside over the next 12 months!
So what doesn't Johnson like about Tesla stock?
Accentuating the negative, Johnson notes sales of Tesla electric cars -- not counting leases -- dropped 20% sequentially in the first quarter, which sounds worse than the actual year-over-year sales decline of 8.5%. Price cuts on the cars Tesla does manage to sell, moreover, continue to get bigger. Johnson forecasts a $2,000 sequential decline in average selling prices.
On top of all this, Tesla is laying off workers -- 10% of its workforce, the latest reports claim. (On StreetInsider.com, Johnson suggests the real cuts could be as high as 20%.) To hear him tell it, this implies a 13% reduction in Tesla deliveries in the second quarter, to 405,000 units, because fewer workers can't build as many cars.
Of Johnson's three main points, one has the most holes in it. Consider that in laying off workers, Tesla isn't just responding to weak demand, but slimming its workforce in some areas to grow in others. "About every five years, we need to reorganize and streamline the company for the next phase of growth," explains CEO Elon Musk.
Make no mistake: Tesla's in for a rough year. Most analysts agree that last year's $15 billion in net profit will dwindle to less than $9 billion in 2024. But most analysts also forecast Tesla's profits to triple (to $25.8 billion) by 2028 as Tesla finds new directions to grow.
I wouldn't count Tesla stock out just yet. Johnson's missed this call.
