Though experts and analysts tend to look favorably upon Tesla (NASDAQ: TSLA) with, for example, Jim Cramer recently calling it a ‘strong stock’ and expressing his belief that Elon Musk managed to turn the car manufacturer into a true technology giant, not all are as optimistic about the electric vehicle (EV) maker.
Gordon Johnson, the founder and CEO of GJL Research, recently took to X to explain why the hopes that Tesla will dominate the sector – and that TSLA will dominate the stock market – as it did in the aftermath of COVID-19 are baseless.
Why Tesla stock may never be as good as in 2022 again
According to Johnson, Elon Musk’s EV maker has heavily benefitted from the pandemic-caused global shortages and supply-chain disruption as it was willing to go the extra mile to acquire the needed chips.
The expert also stated that Tesla’s subsequent boom resulted from a combination of factors, including the company’s temporary ability to meet demand when its competitors couldn’t, cutting corners, and bumping prices.
‘E. Musk also rashly removed radar from his cars, as well as fog lights, parking sensors, safety chips in his steering wheels, and turn signal stalks,’ Johnson explained.
He added that, along with cost-cutting measures on the production side, ‘Tesla used this temporary period of folks willing to pay a lot more for cars than what they were worth to raise prices, sending the company’s margins to unforeseen (and temporary) heights, which E. Musk sold to the public as TSLA being better at producing cars than his peers.’
The analyst concluded that such a representation of Tesla was a ‘mistruth’ and pointed toward the data on major automakers’ operating margins, which show Musk’s EV maker near the bottom.
Operating margins of major automakers. Source: @GordonJohnson19
Finally, Johnson stated that, along with Musk’s inability to catch the pandemic lightning in a bottle twice, the company is also hampered by the rising competition that emerged as the government was willing to incentivize the production of electric vehicles heavily.
The expert described the current situation in the EV market as a ‘race to the bottom’ as companies continue lowering prices and, thus, continue reducing their margins.
What is behind Johnson’s staggeringly low $22 TSLA stock price target?
Along with the most recent analysis of Tesla’s current EV market woes, Gordon Johnson has been bearish about the stock for a long time and has repeatedly emphasized – as he also has in the recent analysis on X – Musk’s tendency to promote TSLA using what he describes as ‘vaporware.’
Indeed, the billionaire CEO of Tesla Motors has a track record of failing to deliver on his promises. The most recent and relatively benign example comes with the moving of the ‘Robotaxi’ event from August to October.
Perhaps more serious examples are made up of Tesla’s self-driving capability coming next year without actually arriving for approximately a decade, or the fact that the ‘Cybertuck’ was initially said to cost just under $40,000 while, at press time, all models cost approximately $100,000.
The combination of these factors and Johnson’s lack of belief in TSLA as a big tech and not a car stock have also led to the expert setting a staggeringly low price target for the EV maker at $22. Furthermore, that revision came as a downgrade compared to the late January prediction, which forecasted the shares would drop to about $23.50.
Can Tesla still impress?
Still, Johnson’s exceptionally bearish predictions are yet to come to fruition despite TSLA stock’s troubles in 2024. The company is down 15.83% in the year-to-date (YTD) chart to Tesla’s price today, at press time, of $209.10, which is ten times as high as the price target, despite the firm being very quick to erase its massive July rally.
TSLA stock YTD price chart. Source: Finbold
Despite the recent issues and GJL Research’s pessimistic outlook, there is still room for Tesla to wow investors and fans, particularly if the ‘Robotaxi’ event in October proves successful and if it manages to truly make its humanoid ‘Optimus’ robot commercially available in 2025 as both would ensure the EV maker’s transition into a technology and artificial intelligence (AI) firm.
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