Bank of America (BofA)’s analyst John Murphy lowered Tesla‘s price target on Tuesday by nearly 20% to $305, in anticipation of the company’s first-quarter earnings report scheduled for later in the day.
Based on Monday’s closing price of $227.50, BofA’s new price target implies an upside potential of 34% on Tesla‘s stock despite “extremely elevated” levels of uncertainty. The bank kept its Neutral rating on the shares.
In a new research note, the analyst stated that the first-quarter production volumes and sales could lead to better-than-expected financial results. However, the level of uncertainty surrounding tariffs is “extremely elevated” and its potential impact remains “far from being settled.”
Although Trump announced a 90-day pause on new tariffs while the U.S. negotiates with several countries on April 9, the 25% duty on imported vehicles and auto parts is still in effect.
The tariff on Chinese products remains and was raised from the proposed 54% to 145%, reaching as high as 245% on some of the imported items. In response, China imposed a 125% tariff on U.S. goods as trade tensions continue to rise.
Last week, Reuters reported that Tesla’s upcoming Cybercab production might suffer delays due to components shipped from China. Citing a person familiar with the matter, the report said the company could not absorb the rising tariffs on Chinese goods when they “went beyond” 34%.
Murphy has lowered valuation multiples by “up to 1.0x across the companies” covered by the bank, believing that the unclear outlook will likely push many companies to delay or withdraw their financial guidance for the year.
In a previous note released in early March, Murphy had already cut Tesla‘s price target from $490 to $380, noting that “potential tariffs on Mexico and Canada pose significant risk to our North American production estimates and could create a supply shock similar to COVID.”
By then, the analyst noted the lack of updates on the company’s low-cost model, concerns about the “sentiment on the brand potentially souring” as competition increases and Elon Musk gets more involved in politics, and a drop in sales in Europe.
These concerns are shared by the company’s shareholders who, ahead of the earnings report, have expressed them on Say Technologies’ platform. The investors are also pressuring management regarding the full self-driving (FSD) system and the upcoming Cybercab, urging the brand to roll out concrete timelines for the products’ launch.
Tesla shares are currently trading at $235, up 3.5% from Monday’s close. Year to date, the stock is down about 40%, despite surging nearly 62% over the past twelve months.
Also on Tuesday, BofA also cut Detroit automaker General Motors‘ price target by 12% to $75, keeping a ‘Buy’ rate on the shares. Based on the previous close of $44.39, the new price target on GM implies an upside potential of 69%.
