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Tesla stock drops as Goldman cuts price target, maintains 'Buy' rating

Goldman Sachs has cut its price target on Tesla (TSLA) stock to $235 from $305, but maintains its Buy rating on the stock as it still sees positive long-term prospects.

This comes as Tesla stock as dropped to lows not seen since November 2020, with shares down down 55% this year.

“We believe that Tesla remains well positioned for long-term growth as an EV cost structure and full solution leader (e.g. providing vehicles, charging, storage, software and services in a well integrated manner), and we maintain our Buy rating on the stock,” Goldman analyst Mark Delaney wrote today in a note today.

However, Delaney said the firm is now switching to a P/E based price target, and has introduced a new model for its 2025 EPS estimate.

From a deliveries perspective, Goldman sees Tesla hitting 420K deliveries for Q4 (down from 440K prior), and 1.85M units in 2023 (down from 1.9M).

Delaney notes that while the company could have production capacity for around 2.4 million units in 2023, “macro indicators” in several regions Tesla operates are moderating, and Tesla’s recent moves such as price cuts and insurance incentives suggest that global demand is now softer for Tesla.

However, Tesla has a number of positive cost drivers coming up in the years ahead, Delaney said, citing ramp ups in Austin and Berlin that could boost profitability, new battery cells, IRA credits, and a potential new vehicle platform that could cut costs by around 50%.

“We believe that passing reduced costs on to consumers, as well as factors like expanding leasing programs and consumer tax credits, could help Tesla to drive growth and margins. However, the degree to which these levers will help volume, and the cost to Tesla to achieve them, will be key to monitor,” Delaney writes.

Of note is Delaney’s comments on CEO Elon Musk, noting that his increased presence at Twitter and foray into political topics has resulted in Tesla’s brand becoming “more polarizing.” Delaney said it’s crucial for Tesla to shift back the consumer focus of the company to its “core attributes of sustainability and technology,” in order to exceed its long-term expectations for Tesla.

Assuming Tesla can re-shift that consumer focus, and execute on its vision of EV growth in multiple regions and control costs with new tech and platforms, the stock could see some upside.

“To the extent Tesla can demonstrate that its demand levers and the IRA can help drive strong growth and margins in the coming quarters, then we believe as an upside case the stock could trade to ~$300 using 40-50X (which would be supported by a somewhat higher growth rate using a PEG analysis, and per our investor discussions) a $6-7 EPS estimate,” Delaney said.

NEW YORK, NEW YORK - MAY 02: Elon Musk attends The 2022 Met Gala Celebrating
NEW YORK, NEW YORK - MAY 02: Elon Musk attends The 2022 Met Gala Celebrating "In America: An Anthology of Fashion" at The Metropolitan Museum of Art on May 02, 2022 in New York City. (Photo by Theo Wargo/WireImage)

Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.

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