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Why Wall Street Analysts Downgraded Tesla in March 2018

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Analysts’ ratings on Tesla stock

According to data compiled by Reuters on March 27, about 35.0% of analysts covering Tesla (TSLA) gave its stock a “buy” recommendation. Another 30.0% recommended a “hold” while the remaining 35.0% of analysts covering TSLA suggested a “sell” for its stock. These recommendations were based on the consensus of 26 Wall Street analysts covering Tesla stock in March 2018.

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Consensus target price

Analysts’ 12-month target price consensus for Tesla stock was $325.58. This target price reflected an upside potential of about 16.6% from its closing price of $289.18 on March 27.

In 2018 so far, Tesla has fallen 10.3% versus the 2.3% value erosion seen in the S&P 500 Index. In 4Q17, its stock lost ~8.7%, primarily due to a much slower-than-expected Model 3 production ramp-up. 

By the end of 1Q18, Tesla planned to achieve a Model 3 production rate of 2,500 units per week. However, Wall Street analysts expect its Model 3 production rate in 1Q18 to be much lower than this target.

Other negative drivers

Last week, a Tesla Model X driver died in an accident in California. On March 27, Tesla stock fell ~8.2% after the NTSB (National Transportation Safety Board) initiated an investigation into this accident.

In 4Q17, the company reported a non-GAAP (generally accepted accounting principles) adjusted net loss of $3.04 per share, which was better than the analysts’ estimates of $3.10. Despite a positive trend in the company’s revenues, its weaker automotive gross margin and its continued Model 3 production issues subdued investor sentiment. In the coming few months, the Model 3 ramp-up is critical for the company to encourage its investors.

On March 27, Tesla’s market capitalization fell to $47.2 billion from ~$56.3 billion about a month ago. Automakers (XLY) General Motors (GM), Ford (F), and Ferrari (RACE) had market capitalization figures of $48.8 billion, $43.0 billion, and $22.9 billion, respectively.

Continue to the next part to learn how analysts are rating General Motors stock in March 2018.

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