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Professor Jeremy Siegel (left) thinks it might be a good idea for Wall Street to distance itself from Elon Musk’s (right) Tesla. Left: Scott Mullin—CNBC/NBCU Photo Bank/NBCUniversal/Getty Images. Right: Beata Saursel—NurPhoto/Getty Images
Wharton legend Jeremy Siegel says growing doubts about Tesla’s place in the so-called “Magnificent Seven” of Wall Street’s most popular stocks is good for the economy.
Tesla has had a rocky time over the past year or so. In January, the EV maker was overtaken by Chinese rival BYD to become the world’s largest automaker.
But not only is the competition trailing behind Elon Musk, he’s also being criticized by shareholders for not having a plan to get back in front.
After a series of lackluster earnings reports and headlines about Musk’s use of prescription ketamine, analysts are trying to draw a line between drama-laced Tesla and skyrocketing stocks like chipmaker Nvidia. Perhaps it’s no wonder.
That’s a good thing for Professor Siegel, professor emeritus of finance at the University of Pennsylvania’s Wharton School and senior economist at exchange-traded fund specialist WisdomTree.
“There’s more talk of Magnificent 6 than Magnificent 7, highlighting Tesla’s underperformance over the past nine months or so,” Professor Siegel said in his weekly commentary for investment professionals. I wrote.
Is Telsa still part of the Magnificent 7?
The Magnificent 7 (MAG7) are the superpower stocks that underpin the S&P500: Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla.
In November, analysts from JPMorgan, Goldman Sachs, Oppenheimer and others said: luck They were optimistic about the group’s overall performance.
Professor Siegel believes that the split between Tesla and peer MAG7 is a good thing, explaining: All seven Magnificent companies are not treated as one group, and there is a separation between Tesla and other companies based on differences in revenue projections. ”
Just this past weekend, Goldman Sachs analysts did just that, lowering their Tesla forecasts based on production and market headwinds.
Saw memo luck The paper, written by equity researchers Mark Delaney, Will Bryant, Morgan Leung, and Aman Gupta, says: (including our ability to provide complete solutions such as charging, storage, software/FSD, and services, and our industry-leading cost structure), and believe that short-term EV market weakness is weighing on revenues. Masu. ”
As a result, Quartet revised its 12-month price target to $190 (from $220), with a 12-24 month upside scenario of around $300. They added that the downside could be between $65 and $85.
In the note, Goldman also revised down Tesla’s delivery forecast, forecasting between 2.35 million and 2.75 million vehicles for 2025/2026, compared to a figure of 2.53 million to 3 million vehicles.
Goldman’s changes follow the permanent demotion of Wells Fargo analyst Colin Langan.
He wrote in a note to clients last Wednesday that he had effectively downgraded the stock to the equivalent of a “sell.” Langan expects Tesla’s sales to be flat this year and then decline in 2025.
Langan added that Musk’s company is a “growth company without growth,” stressing that volumes in the second half of 2023 were only up 3% compared to the first half, and prices were down 5%.
very high stock valuation
Even if only on a superficial level, Wall Street is starting to differentiate between Tesla and the rest of the MAG7, which may go some way to reassuring market bears about broader valuations.
Last month, for example, Wall Street legend John Hussman said he would “stick to my ways” and avoid rampant “fear of missing out” (FOMO) trading.
The president of Hussmann Investment Trust believes the market has peaked and is now settling into a decade of “disastrous” returns.
He pointed out: “We cannot know the future, but it is easy to look at history and calculate. Current market conditions have a strong positive correlation with historical market highs, and The negative correlation with market lows is stronger than in 99.9% of cases in history.”
And while MAG7 is no stranger to huge gains and losses in a single day, the EV maker topped by Tesla Inc. may not be as high on FOMO traders’ lists as it once was. is high.
Investors have been somewhat buoyed by releases such as the much-hyped Cybertruck and a mass-market electric vehicle that goes into production next year, but it hasn’t been enough to stem the decline in the company’s stock price.
Tesla stock has fallen nearly 31% year-to-date and 6% over the past year.
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