HSBC analysts have recently revised their target price for Tesla (NASDAQ:) to $118, down from $130 per share. This new target represents a 52% downside from the current share price of Tesla. The analysts have maintained a Reduce rating on the stock, citing various challenges the company is currently facing.
The analysts at HSBC have highlighted the mixed performance of Tesla in the last quarter, with the company reporting a 15% operating profit miss against consensus. This miss was partly due to restructuring charges of $622 million, which some consider as one-off costs. On the other hand, there were concerns raised about the sustainability of regulatory credits, which were more than double the expected amount.
Even after adjusting for these factors, HSBC notes that Tesla’s adjusted operating profit still missed by approximately 7%, with profits down 26% year-over-year. The primary concern lies within Tesla’s automotive segment, where the analysts point out challenges such as an ageing model lineup and increasing competition in a flattening BEV market.
Additionally, the Energy Storage (ESS) business, despite showing strong volume growth of 160% year-over-year, is facing pricing pressures likely due to reductions in material costs. Looking ahead, HSBC expresses skepticism about Tesla’s future projects, including AI, Optimus, and Dojo, questioning their timing and commercial viability.
The analysts believe that while Tesla’s future projects could drive growth, the timeline for their market impact remains uncertain. HSBC’s reduced target price is based on a 50:50-weighted DCF and peer multiples-based valuation, reflecting ongoing challenges in EV sales, model ageing, and competitive pressures. The bank suggests that Tesla’s current valuation appears overly optimistic given these challenges.