Wall Street analyst Gordon Johnson, an analyst at GLJ Research, has made a huge bearish prediction about Tesla’s stock. Johnson cited several issues in his warning that the stock could experience huge losses this year. He noted that this could cause distress for the company’s businesses in the long run.
Johnson’s prediction is coming after Tesla’s Q4 2024 deliveries failed to meet the predicted target. Despite this, the stock registered a slight surge on January 3, climbing to $410.44 after an 8% jump.
According to Johnson’s post on X, Tesla is experiencing distress on its business front, a development that could have a telling effect on its stock.
Analyst explains why Tesla’s stock could decline
In his post on X, Johnson explained that Tesla is suffering from declining sales for the first time in its history. He said it could translate to a worse margin when the 2024 earnings are released.
“Things are bad for $TSLA’s actual biz. Sales just went ex-growth for the first time, and margins will likely see an absolute bloodbath when Q4 earnings are reported,” Johnson said.
Analysts have projected Tesla’s average total revenue in Q4 2024 to be around $27.18 billion, representing an 8% increase from its Q4 2023 revenue figure of $25.17 billion. The full-year revenue is also expected to increase by $99.63 billion, a 3% increase from its 2023 revenue of $96.77 billion.
Meanwhile, Tesla’s Q4 2024 report indicated that deliveries dropped to 495,570 from the 504,770 expected by analysts for the quarter. The total number of deliveries for the year also dropped to 1.79 million compared to the 1.81 million deliveries in 2023.
Although production numbers were fair, there have been raised eyebrows over the drop in annual deliveries considering its aggressive market share growth influenced by CEO Elon Musk ’s affiliation with incoming president Donald Trump.
Notably, Tesla suffered significant challenges in 2024, with its decline in demand worsened by competition from rivals like Hyundai. Musk had initially predicted slowed growth in 2024, a reality that has dawned on the company.
The future of Tesla’s stock
According to Johnson, Tesla’s stocks’ ability to rally regardless of its failure to meet analysts’ expectations can be tied to a rise in options trading. He noted that the stock price is being pushed upwards by heavy call option purchases. He said the moves, dictated by speculative traders, are legally manipulating the stock price.
In addition, he mentioned that the development is taking the attention away from the company’s deteriorating fundamentals. Furthermore, he predicts that the stock will see bearish signals, as it will battle with declining growth and increased competition. Johnson has always held a bearish view of the stock, noting that the company is overvalued.
However, Johnson is not the only one with a bearish outlook. JPMorgan has also warned that several issues, including delivery and regulatory changes, could cost the company about $3.2 billion. JPMorgan has consequently issued an underweight rating, adding a $135 price target.
Meanwhile, a narrative that counters the bearish outlook is the advancement of its full self-driving (FSD) and AI technology. The company has focused on both areas even in the face of competition and delivery challenges. Although both areas of focus are still speculative at the moment, the move could help the company maintain its lead in the EV market.
Analysts have also floated that friendly regulations under Donald Trump’s administration could potentially help Tesla thrive.
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