Tesla Analysts Will Just Flip Their Stories & Follow the Stock Down

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Steve Hanley just wrote early this morning about JP Morgan slashing its sales forecast for Tesla in Q1 and putting a $120 price target on the stock, the lowest on Wall Street and ~$130 below Tesla’s current stock price of ~$250. Of course, this comes after Tesla saw a sales decline in 2024 (that Elon Musk said a couple of times Tesla wouldn’t see) and a further sales decline to start 2025.

But don’t let JP Morgan’s forecast deceive you. The median price target on Wall Street for Tesla’s stock is $370! That’s about $120 above its current price. I didn’t know what the median price target was when reading the report on JP Morgan’s update, but I knew that most analysts had much higher price targets on the stock, and something crossed my mind. I remember the Tesla stock price’s long, steep rise over several years, and I remember how analysts as a group just basically followed the stock price up. Sure, at any given moment, some analysts had more bullish forecasts, others more bearish, but as a whole, they were basically just following the stock price’s rise over time.

I think, if the stock price does drop much lower (and I think it will), Wall Street analysts will in a similar way just track the price downward long term. If the stock price slides a bit more to $200 and below, the analysts will adjust their numbers and targets. Did they see the sales slump coming? Did they see competition in China getting better than Tesla? Did they see European and American demand for Teslas drooping as people got a little tired of the Tesla offerings, and Elon Musk?

In short, the analysts’ price targets are glorified wild guesses, and, as a group, they just shift along with the stock price. In a year, if the stock price is below $200, the analysts will have found reasons to justify lower price targets. If it goes to $150, they will go lower still.

What I think is critical at the moment is that Tesla’s growth story hasn’t just stalled, sales have dropped significantly. If Tesla turns this around, maybe the stock doesn’t go much lower. But if this decline continues, it could be a long, deep slide downward. Full Self Driving, or robotaxis, is supposed to be the differentiator for Tesla versus other automakers, but the longer that achievement is delayed, the more analysts will have to consider whether it makes sense to grade Tesla so much differently from other automakers and justify a P/E ratio about 10 times higher than other automakers’. For a long time, Tesla’s P/E ratio has floated far above that of others in the industry. The most commonly provided reasons for that are expected growth far above the rest of the industry (and that’s clearly gone — or even gone in the wrong direction, at least for the time being) or exponential growth from some other revenue source (robotaxis, robots). We’ll see if any significant advancements from Tesla bring back one of those justifications this year. If not … well, stay tuned.