HSBC "Suggests Selling, Target Price 146", Tesla Falls 5% Again

Can the growth story of Tesla continue?

On Thursday, November 9th, local time, HSBC analyst Michael Tyndall downgraded Tesla's rating to "sell" with a target price of $146, a 33% decrease from the current stock price.

In response, Tesla's stock price fell nearly 5.5% at the close of the day. Over the past month, Tesla's stock price has fallen by a cumulative 18.9%.

Tyndall explained in the report that the reason for the downgrade was that "we believe the delivery schedule may be longer than what the market and valuation reflect, thus lowering the rating."

Non-automotive products will be the main obstacle to growth

Specifically, Tyndall believes there are three reasons why he is bearish on Tesla.

Firstly, the delivery schedule. Tesla's ambitious goal of delivering 20 million vehicles by 2030 is seen as overly optimistic by Tyndall, given the company's track record of meeting commitments. Tyndall stated in the report:

"Our caution stems from the time and commercial uncertainties surrounding these various ideas."

Secondly, the prospects of non-automotive products. Tyndall believes that non-automotive products, including the Dojo computer and Full Self-Driving (FSD), are the main obstacles to Tesla's growth story, as their expected capital costs are much higher than the group's average due to regulatory and technological challenges.

Lastly, Tyndall referred to CEO Elon Musk as a "risk." He believes that Musk's personal reputation far exceeds that of the company globally. While Musk's prominent position has saved Tesla significant marketing and advertising costs, it has also brought about a "considerable 'single point of failure' risk" for the company.

However, Tyndall acknowledges in the report that Tesla currently holds a leading position in the electric vehicle market and believes that its premium is justified. He stated:

"Tesla faces fewer challenges than existing car companies, so it deserves a premium: we view traditional car manufacturers as pre-growth companies; they sell products in (largely) saturated markets, and their ability to set higher prices has always been limited."

Tyndall also mentioned the upside risks, including a faster-than-expected global transition to electric vehicles, continued market share growth for Tesla, and favorable regulatory environments for products like FSD.

Another bearish voice on Tesla

Due to declining demand, Tesla has recently faced increasing bearish sentiment in the global electric vehicle market, as the downturn spreads. The media's pessimistic reports on the Cybertruck have further exacerbated Tesla's stock price woes.

On November 6th, local time, some media outlets had a close-up look at the publicly displayed prototype of the Cybertruck and described it as "terrifying".

It is reported that the prototype has certain flaws in terms of surface coating, build quality, panel gaps, rear visibility, and so on. The reporter of this report bluntly stated:

"I couldn't help but feel embarrassed, as if I were looking at a second-hand item."

"I have come into contact with hundreds of prototypes, from early test mules to near-production prototypes, and I have never seen an automaker proudly showcase something of such poor quality."

Previously, Tesla had promised that the Cybertruck would be delivered within 30 days by November 30th. However, based on current feedback from over a million orders, the results may not be satisfactory.

Even Elon Musk himself expressed a pessimistic view on the growth of the Cybertruck during the Tesla Q3 earnings conference call. Despite Musk calling the Cybertruck the best product Tesla has ever made, he also stated that "making the cash flow positive for the Cybertruck will face enormous challenges."