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Goldman Sachs has revised its expectations for Tesla, Inc. (NASDAQ:TSLA) downward, citing a combination of production difficulties and weakening market demand for electric vehicles.
Analyst Mark Delaney pointed out a series of factors leading to a tempered expectation for the electric vehicle (EV) giant, highlighting the slower-than-anticipated ramp-up of the Model 3, operational disruptions in Berlin, and a general softening in EV demand.
Goldman Sachs emphasized the slowdown in the Model 3 production ramp in the United States for Q1 2024, as evidenced by prolonged delivery times and an 18% year-to-date drop in Model 3 sales.
Operational interruptions at Tesla’s Berlin facility, attributed to the Red Sea conflict in January and a power outage in March, have further strained production.
The investment bank also highlighted a decline in Tesla app downloads in the U.S. and Europe, as well as reduced exports from Tesla’s China factory, reflect broader market headwinds.
Reflecting these challenges, Goldman Sachs has revised its delivery forecasts for Tesla, lowering its 2025/2026 estimates to 2.35 million/2.75 million units from the previously projected 2.53 million/3.00 million units.
Additionally, the investment bank has adjusted its 12-month price target for Tesla from $220 to $190, maintaining a 50X multiple on updated earnings estimates but acknowledging the potential for significant fluctuation which imply an upside scenario of $300 – based on a multiple of 50X-60X applied to 2026 earnings per share – and a downside scenario of $65-$85 using a multiple of 30X applied to 2024 EPS.
| Goldman Sachs On TSLA | Price Target | Note |
|---|---|---|
| Baseline Scenario | NEW $190 (down from $220) | based on 50x forward P/E for 2024 EPS |
| Upside Scenario | $300 | based on 50-60x P/E on 2026 EPS |
| Downside Scenario | $65-$86 | based on 30x P/E on 2024 EPS |
Despite near-term obstacles, Goldman Sachs sees potential drivers for Tesla’s growth, including the ramp-up of new models such as the Model 3 and Cybertruck as well as a forthcoming refresh of the Model Y and the introduction of a low-cost vehicle expected to be priced between $25,000 and $30,000.
However, the report also outlines several risks that could further impact Tesla’s valuation and performance, including possible larger-than-anticipated vehicle price cuts, heightened competition in the EV sector, product and technology delays, and operational challenges tied to Tesla’s highly integrated business model.
Market Impact
Tesla’s shares have recently experienced a notable decline, dropping 34% year to date and marking the worst performance among S&P 500 stocks. The company has shed more than $400 billion in market valuation, falling out of the group of the top 10 largest corporations in the U.S.
The Consumer Discretionary Select Sector SPDR Fund (NYSE:XLY), the exchange-traded fund holding the largest share of Tesla in its portfolio with a weight of 11%, has seen its price stall year to date.
Amid these adjustments, oversold technical conditions are starting to emerge in Tesla’s daily chart, suggesting that the market may have already priced in much of the negative news surrounding Tesla. This could potentially curb further bearish momentum in the short term, barring the emergence of new adverse developments.
Tesla shares are up 3.4% on the pre-market trading Monday, hinting at some buy-on-dip behavior or a corrective response to the recent downward trend.
Chart: Tesla Shares Screen Oversold RSI, Potentially Hinting A Near-Term Rebound
Image created using artificial intelligence with Midjourney.
