Tesla Stock Faces Significant Drop: Analyst Warns of Challenges Ahead

Tesla Inc (NASDAQ: TSLA) has experienced a notable decline in its stock value, approaching a 50% drop since reaching its all-time highs. This downturn is attributed to weaker than expected demand in critical markets, particularly in Europe.

The Tesla Analyst: Mark Delaney from Goldman Sachs has kept a Neutral rating on Tesla, adjusting the price target from $345 to $320.

Market Observations: In his latest investor note, Delaney highlighted that the overall demand trends for electric vehicles have been slowing down, which directly impacts Tesla's delivery forecasts. He emphasized that the forecast for deliveries is downgraded due to these declining demand signals.

Delaney noted, "We continue to expect Tesla to face difficult fundamental conditions in the near term, and our earnings per share estimates are below the market consensus for 2025." However, he remains optimistic about the company's long-term growth potential, particularly through software revenues, such as the Full Self-Driving (FSD) package.

Recent reports indicate that the decline in first-quarter deliveries might be linked to the transition to newer Model Y vehicles and the broader decrease in demand.

Despite these challenges, Delaney anticipates stronger delivery numbers in March as production of the updated Model Y increases. His revised estimate for first-quarter deliveries has been adjusted from 399,000 units down to 375,000 units, reflecting a significant 40% decrease in European demand in January alone. For the entire fiscal year, he now projects Tesla's deliveries at 1.91 million, a slight drop from the previous estimate of 1.96 million.

Consumer sentiment has also shifted, with survey data indicating lower ratings for Tesla's brand value and trust in recent months. Delaney has pointed out that competition is becoming more intense in China, where rival companies are launching similar software capabilities without requiring additional purchases from consumers, complicating Tesla's ability to monetize its FSD feature there.

Stock Performance: Currently, Tesla shares are trading at $271.61, reflecting a steep decline of 28.4% year-to-date in 2025 within a 52-week range of $138.80 to $488.54. This performance is reminiscent of the stock's position immediately following the 2024 presidential election when it initially surged after Donald Trump’s victory.

With current stock prices nearing $271.61, Tesla is approaching a critical milestone, closing in on a 50% drop from its peak in December.

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