Tesla Faces Challenges Despite Recent Stock Rally

Overview

Tesla, the electric vehicle manufacturer, has experienced a boost in its stock prices this week, with shares jumping more than 7%. However, Guggenheim, an investment firm, remains pessimistic about the stock’s performance.

Concerns about Supply and Demand

In a note issued on Wednesday, analyst Ronald Jewsikow from Guggenheim pointed out that U.S. inventory trends indicate that supply is exceeding demand. He stated, “QTD US inventory is a clear sign that at current run rate supply, US demand is trailing production output.” Tesla’s U.S. inventory has grown by approximately 50% since the beginning of the quarter, mainly due to an increase in the Model Y.

Guggenheim’s Sell Rating and Price Target

Guggenheim has assigned a sell rating to Tesla shares and set a price target of $125. This target implies a 51.4% decline from the closing price on Tuesday. The analyst believes that price cuts or lower deliveries may be necessary in September to stimulate demand. However, he also warns that these actions could negatively impact gross margins estimates for the third quarter.

Disconnection from the AI Trade

Despite the recent rally, Jewsikow noted that Tesla is diverging from the AI (artificial intelligence) trade. He said, “We have seen the correlation TSLA has with other AI stocks decline to insignificant levels.” Additionally, he mentioned that some AI stocks in Guggenheim’s basket are already experiencing positive revisions to their numbers, a situation that he does not believe is realistic for Tesla in the near-term.

Stock Performance and Outlook

Although the stock is still trading over 108% higher year-to-date, Tesla experienced a slight decrease of 0.7% during premarket trading on Wednesday. The company’s performance in August was challenging, and it may face additional obstacles in the future, requiring adjustments to maintain growth.

Source: AsumeTech’s /p>