- One of Wall Street’s biggest Tesla (NASDAQ:TSLA) bulls has slashed his price target
- Analyst Dan Ives cited China headwinds as the primary reason for the price cut
- Through it all, TSLA stock remains in the green this morning
Dan Ives has reduced his Tesla (NASDAQ:TSLA) price target due to concerns about the company’s China operations. The Wedbush analyst has been highly bullish on TSLA stock for months. Yesterday this changed when he slashed his price target from $1,400 to $1,000. While the target is still significantly higher than TSLA’s current share price of $715, it is still a noticeable step down. Tesla stock is turbulent today, up 0.78% at the time of writing.
Ives’ 180 on TSLA Stock
Why did the analyst suddenly turn on TSLA stock? The primary reason is China. More specifically, as Ives outlined in a note to investors, the company is facing significant economic headwinds following the Shanghai shutdowns. While production has resumed in a limited capacity, Ives notes that the shutdowns have impacted both production and demand. Barron’s reports that Tesla’s Shanghai plant shipped only 1,512 vehicles during April 2022. When we consider the typical 60,000-70,000 produced and distributed by Tesla in a typical month, that figure isn’t exactly encouraging.
Ives isn’t the only analyst to sour on TSLA stock recently. Alexander Potter of Piper Sandler recently reduced his price target as well, bringing it down from $1,260 to $1,035. Also previously bullish on TSLA, Potter espoused similar reasoning to Ives. As he sees it, the problems in China will certainly push TSLA stock down while the company’s new Berlin and Texas gigafactories will negatively affect margins. The analysts predict that Tesla will report weaker-than-expected Q2 earnings.
As grim as these predictions sound, both Ives and Potter maintain “buy” ratings for TSLA stock. Ives emphasized that his bull thesis on the company remains the same, though with new factors to account for. “We remain firmly bullish on Tesla over the long-term and our thesis has not changed, however we have to reflect a new reality for Tesla in China with headwinds abound in a shakier macro backdrop,” he noted.
While Ives is less concerned than Potter about production from the new gigafactories, he acknowledges that it will take time for them to reach full production capacity. While the Berlin and Austin facilities have the potential to someday account for lags in production at other plants, it won’t be before Tesla reports Q2 results. Ives does acknowledge the supply chain constraints Tesla is still facing, though, calling them the “worst in modern history.”
The Road Ahead
The new Wall Street argument that Tesla won’t be reporting positive earnings for the current quarter is well-founded. However, it is important to remember that Ives is still bullish on TSLA stock. He sees it as a buy and still believes that Tesla has the potential to grow. However, he has adjusted his thesis to account for new risks and thinks that investors should prepare for less-than-positive numbers when Tesla reports Q2 earnings.
TSLA stock is dipping right now, and it may fall even further. But investors shouldn’t lose sight of the fact that the company has an important catalyst coming up. The Tesla stock split will be voted on at the Aug. 4 shareholder meeting, and it is likely to pass. Ives and Potter are likely correct that TSLA stock will struggle in the coming weeks but that it will also rise again.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
