U.S. may expand Nvidia and AMD’s 15% China chips deal to other companies
On Wednesday, BNP Paribas (OTC:BNPQY) Exane adjusted its outlook on Tesla shares (NASDAQ:TSLA), reducing the price target to $137 from the previous $150, while keeping an Underperform rating on the electric vehicle manufacturer’s stock. The target sits well below the current analyst range of $120-$515, with InvestingPro data showing 12 analysts recently revising their earnings estimates downward.
Stuart Pearson (LON:PSON), an analyst at BNP Paribas Exane, expressed concerns over Tesla’s first-quarter performance, suggesting it could lead to a significant reassessment among investors and analysts alike. Pearson pointed to the potential for the company’s mid-term earnings estimates to be slashed by half, citing China as a particular area of concern that could contribute to further downside risks. These concerns come as Tesla’s revenue growth has slowed to just 1% over the last twelve months, despite maintaining a high P/E ratio of 111x.
The analyst also highlighted apprehensions regarding Tesla’s free cash flow (FCF), which is anticipated to become negative. This forecast raises questions about how the company will finance its ambitious artificial intelligence (AI) initiatives going forward. While Tesla currently holds more cash than debt on its balance sheet and maintains a healthy current ratio of 2.02, its cash return on invested capital stands at just 4%.
Pearson’s remarks come amid a broader context of scrutiny over Tesla’s financials and strategic direction. The reduction in the price target reflects these concerns and the potential impact on the company’s stock performance in the near to mid-term.
Tesla’s stock performance will continue to be closely watched by investors as the company navigates through these challenges and works towards its long-term goals, including the advancement of its AI technology. The new price target set by BNP Paribas Exane is a reflection of the hurdles Tesla may face in the coming months.
In other recent news, Tesla has faced several noteworthy developments. Piper Sandler has adjusted its outlook for Tesla, reducing the stock price target from $450 to $400, while maintaining an Overweight rating. This change comes as Tesla’s first-quarter financials are expected to disappoint, with deliveries of 337,000 units falling short of the 378,000 consensus estimate. Cantor Fitzgerald also reaffirmed its Overweight rating on Tesla, highlighting the company’s focus on domestic sourcing and vertical integration as strategic advantages. However, the firm acknowledged potential challenges due to CEO Elon Musk’s controversial political positions, which could impact consumer perception.
Additionally, a man in New Mexico has been charged with arson attacks on a Tesla dealership and the Republican Party’s headquarters, with significant damage reported at the dealership. The Justice Department is treating these incidents as domestic terrorism, with severe legal consequences expected for the accused. Meanwhile, Tesla was part of the "Magnificent Seven" stocks that saw a rise in premarket trading amid a potential pause in auto tariffs. This group, including Tesla, experienced a slight increase despite ongoing trade tensions. These recent developments reflect a mix of financial challenges and strategic positioning for Tesla in the current market landscape.
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