Rising interest rates and competitive pressure from Chinese electric car manufacturers have been a headwind for Tesla's (NASDAQ: TSLA) growth lately. The stock is down 31% year to date, and Bank of America is the latest Wall Street firm to cut the price target on the shares.
BofA maintained a neutral (hold) rating on the shares, but adjusted the price target from $280 to $220. The new target, which is usually intended as a projection for where the stock might trade in the next 12 months or so, represents 30% upside above the current share price. However, Tesla may need to show improving growth before the stock moves higher.
Is Tesla stock a buy?
The long-term opportunity in the growing electric car market is a good reason to consider buying shares, but rising interest rates are becoming a problem for Tesla in 2024. Unless interest rates reverse their upward trend, consumers likely won't have an appetite to finance a new car purchase.
This is already showing up in Tesla's numbers. The company delivered 386,810 vehicles in the first quarter, down from 422,875 in the year-ago quarter.
The shares already trade at a valuation that implies high growth expectations, so there shouldn't be a rush to buy the stock right now. With revenue expected to grow at a high-single-digit percentage this year, investors should have time to see how things play out and patiently build a position in the stock before the company's growth picks up again.
CEO Elon Musk is one of those visionary leaders you don't to want to bet against. Obviously, BofA still sees long-term upside for the stock, but just keep in mind, the stock likely won't start moving higher until headwinds clear and Tesla reports growing deliveries again.
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