RBC cuts Tesla stock price target to $314 from $320

On Friday, RBC Capital Markets adjusted its outlook on Tesla stock (NASDAQ:TSLA), reducing the price target from $320 to $314 while maintaining an Outperform rating. The revision by RBC Capital's analyst Tom Narayan was influenced by anticipated lower car volumes, which consequently affect the valuation of Tesla's car business and Full Self-Driving (FSD) capabilities. According to InvestingPro data, Tesla, currently valued at $779.75B, trades at a P/E ratio of 109.33, reflecting high growth expectations. The stock has seen 14 analysts revise their earnings estimates downward for the upcoming period.

Narayan's analysis indicates that the car manufacturing segment constitutes a relatively small component, only 11%, of Tesla's overall valuation. With annual revenue of $97.69B and a modest gross profit margin of 17.86%, the potential impact of tariffs on this part of the business would not be as significant compared to other automakers. The majority of Tesla's valuation, according to Narayan, is derived from its Robotaxi and FSD features, which represent 77%. He believes these services would not be affected by tariffs.

The analyst further elaborated on the possible implications of tariffs on Tesla's operations. Since Tesla's domestic sales are produced within the United States, the company would not face direct manufacturing tariff impacts. However, given the substantial amount of non-US content in Tesla vehicles, Narayan anticipates that Tesla might pass on any tariff costs to consumers. This action could potentially lead to a reduction in sales volumes if tariffs were to become a permanent fixture.

Narayan also touched upon the resilience of Tesla's Robotaxi and FSD business against tariffs. The expectation is that these high-margin businesses would remain unaffected by any changes in tariff policies, thus preserving their contribution to Tesla's valuation.

In summary, while RBC Capital Markets foresees a slight decrease in Tesla's price target due to anticipated lower car volumes potentially influenced by tariffs, the firm maintains a positive outlook on the stock's performance, underpinned by the strength of Tesla's autonomous driving technology and services. InvestingPro analysis shows Tesla maintains a "GOOD" overall financial health score, with analyst price targets ranging from $120 to $515. For deeper insights into Tesla's valuation and 18 additional key ProTips, including detailed financial health metrics, explore the comprehensive Pro Research Report available on InvestingPro.

In other recent news, Tesla's financial outlook has been adjusted by Mizuho (NYSE:MFG) Securities, which lowered its price target for the company from $430.00 to $375.00 while maintaining an Outperform rating. The firm revised Tesla's revenue and earnings estimates for the upcoming years, projecting $20.53 billion in revenue and $0.51 in EPS for the first quarter of 2025, down from previous estimates. For 2025, Mizuho anticipates $101.03 billion in revenue and $2.60 in EPS, which is below the consensus estimates. Looking ahead, Tesla's 2026 revenue projections have been revised to $124.33 billion, with EPS estimates at $3.60.

Meanwhile, China's decision to increase tariffs on U.S. goods has impacted the Magnificent Seven stocks, including Tesla, Amazon (NASDAQ:AMZN), Meta (NASDAQ:META), Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), and Nvidia (NASDAQ:NVDA). This development is part of an ongoing trade dispute, which is expected to affect the profitability of U.S. companies operating in China. Tesla faced additional challenges in the Chinese market, reporting an 11% drop in monthly sales in March. Despite these hurdles, Mizuho reaffirmed its positive stance on Tesla, highlighting its leadership in the U.S. electric vehicle market. However, the firm noted potential challenges in the European Union and China due to increased competition.

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