Goldman Sachs Adjusts Tesla Stock Outlook Amid Weakening Demand and Model Y Transition
Tesla (NASDAQ:TSLA) has faced a tough start to 2025, with shares dropping 35% year-to-date. The significant decline is attributed to several challenges, including disappointing delivery data from key global markets and lower-than-expected sales in January and February.
Analyst Perspective: Model Y Transition and Weak Demand
According to Goldman Sachs analyst Mark Delaney, the primary cause behind Tesla’s recent struggles is the Model Y transition. Delaney, who ranks in the top 3% of Wall Street analysts, also acknowledges that underlying demand for Tesla’s vehicles is weaker than previously anticipated.
Key Insights from Delaney:
- Model Y transition is a significant driver of weakness.
- Weaker-than-expected demand affecting sales.
- US consumer survey data shows a drop in purchase intent and brand trust for Tesla, especially compared to its competitors.
Revised Delivery Forecasts for 2025
Despite concerns, Delaney remains hopeful that shipments will improve in March, driven by the refreshed Model Y ramp. However, the weaker demand has forced him to revise his Q1 delivery forecast downward from 399,000 units to 375,000 units, significantly missing the consensus estimate of 426,000 units.
Updated Projections:
- Q1 2025 deliveries revised to 375K, down from 399K.
- 2025 delivery forecast lowered to 1.91 million, a 7% growth, compared to the previous 10% growth projection.
- Projections for 2026 and 2027 revised to 2.25 million and 2.50 million, respectively.
Long-Term Outlook: Cautious but Optimistic
Delaney’s more conservative outlook reflects his concerns about current Tesla models, though he remains somewhat optimistic about upcoming models. These new vehicles may benefit from lower prices and innovative form factors, but Delaney believes these changes may not be enough to offset Tesla’s ongoing challenges in the near term.
Long-Term Expectations:
- Earnings growth could improve in the long run, especially with increased software revenue from Full Self-Driving (FSD) technology.
- Fundamental conditions for Tesla remain difficult in the short term.
- EPS estimates for 2025 are below consensus, but Delaney expects growth in the longer term.
Price Target Adjustment and Analyst Rating
Reflecting the updated outlook, Delaney has reduced his price target for Tesla from $345 to $320, implying a 21% upside from current levels. However, his Neutral rating signals that investors should take a wait-and-see approach as Tesla works through its current hurdles.
Analyst Action:
- Price target lowered to $320, reflecting a 21% upside potential.
- Neutral rating, suggesting a cautious stance on Tesla.
Consensus Rating: Mixed Sentiment from Wall Street
Tesla’s stock is receiving mixed reviews from Wall Street analysts, with 11 Holds, 10 Sells, and 13 Buys. This results in a Neutral (Hold) consensus for Tesla, indicating caution among investors. Despite the recent struggles, the average price target of $344.31 leaves room for a potential 30% gain over the next year.
Wall Street Sentiment:
- Consensus rating: Neutral (Hold).
- Average price target: $344.31, indicating a 30% upside potential.
