Tesla Shares Plunge as JPMorgan Downgrades Price Target

Shares of electric carmaker Tesla (NASDAQ: TSLA) fell nearly 5% as of 11:24 a.m. ET today. This decline follows analysts at JPMorgan Chase lowering their price target on the stock and maintaining a sell rating.

Notable Downturn in the Auto Sector

Tesla’s stock has experienced a striking reversal over the past five months. After seeing a more than 90% surge following President Donald Trump’s election campaign, it has since relinquished those gains, trading at levels lower than before Election Day.

TSLA data by YCharts

Reflecting on this significant downturn, JPMorgan analyst Ryan Brinkman remarked, “I struggle to think of anything analogous in the history of the automotive industry, in which a brand has lost so much value so quickly.” He has reduced the firm’s price target from approximately $231 to $135, which is the lowest among analysts. Brinkman revised his forecast for Tesla deliveries this quarter to 355,000, indicating an 8% decrease year over year. He expressed concerns regarding CEO Elon Musk’s increased involvement in government affairs.

Brinkman stated, “Mr. Musk’s work with the Department of Government Efficiency has proven controversial domestically, and while many on the political right may find it favorable, the displeasure among those on the left could negatively impact Tesla’s sales.”

Understanding the Impact of Sentiment

Determining how negative sentiment toward Musk affects Tesla’s performance will be challenging. While there seems to be an impact, the true extent will become clearer only after the first-quarter results are released. It’s also plausible that this negative sentiment may have a transient effect.

Some analysts remain puzzled about the reasons behind Tesla’s surge following Trump’s election and view the current stock valuation as unfavorable in the present market dynamics. With a forward earnings ratio of 86, some are choosing to refrain from investing in the stock at this time.

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JPMorgan Chase is an advertising partner of Motley Fool Money. Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase and Tesla. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.