Goldman downgrades target on Tesla shares: there are worse problems than Musk's conflict with Trump

Goldman Sachs reduced the target price of Tesla shares, and it is now below not only the average of analysts, but also less than their current market value. The reason was not even the conflict of Ilon Musk with Donald Trump, because of which the securities collapsed a day earlier. The analyst is concerned about deeper problems of the automaker.

Goldman Sachs analyst Mark Delaney lowered his target price for Tesla shares by $10 to $285, reported CNBC. The new target was roughly in line with the current price of the securities at the time the note was written - after they collapsed 14.3% on June 5. But it was less than the value of the securities at the opening of trading on June 6: they rose to $302.55. Goldman Sachs' target price is also below analysts' average: it is $289.2, CNBC noted, citing LSEG data.

Delaney reiterated a Neutral rating on Tesla stock, which is in line with the recommendation to hold already purchased securities in the portfolio.

The main reason for lowering the target price was Tesla's falling global sales. Shipments in the U.S. so far this quarter indicate a decline, and in Europe they lost 50% year-over-year in April, with double-digit declines continuing in May, according to Delaney. In May, Tesla deliveries fell for the fifth consecutive month in the U.K., Germany and Italy, while in China, April-May sales were up compared to January-February, but still 20% lower year-over-year.

«We are lowering our Tesla vehicle delivery assumptions and EPS (earnings per share. - Oninvest) estimates to better reflect weaker monthly performance in key regions (e.g., China, the U.S. and Europe),» the Goldman Sachs analyst wrote in a note.

Delaney also took into account data from analytics companies HundredX and Morning Consult on consumer sentiment, which showed that attitudes toward Tesla became more negative in North America and Europe, although in China were more positive, CNBC writes. The share of people willing to buy a Tesla declined in Canada and Europe, but remained stable in China.

«This suggests that demand/brand issues may be exacerbating weakness in European markets and in the U.S., while the lower performance since the beginning of the quarter in China may be due to increased competition and time in the product cycle (consumers in China may be waiting for a new, cheaper car),» Delaney added.

TD Cowen analyst Itay Micheli on Friday maintained a $330 target price on Tesla shares (suggesting a 16% upside to the last closing price), but noted that Company CEO Ilon Musk's conflict with U.S. President Donald Trump «obviously increases the degree of uncertainty in the near-term, including how political events could impact Tesla sales.»

Morgan Stanley reiterated that it still considers Tesla stock a «top pick,» but admitted that it sees «more volatility than direction» in the near-term movement of the securities. «We leave our $410 target in place, but are prepared for the stock to lose more than the four weeks of gains it has already forfeited,» wrote analyst Adam Jonas. His price target is 44% above the June 5 closing level.

Tesla stock has a total of 55 ratings from analysts and the most popular recommendation is Buy: 21 rating Buy and seven Overweight, shows MarketWatch. Another 15 advise Hold, while 12 advise Sell (Underweight and Sell).

Shares of Tesla collapsed by 14.3% in trading on June 5, with the company's capitalization plummeting by more than $120 billion and Musk's fortune plummeting by $25.5 billion.

The reason was the billionaire's escalating conflict with Trump, which began over a government spending bill that would eliminate tax credits for the purchase of electric cars. Musk harshly criticized the bill, calling it a «disgusting abomination.» Trump on June 5 publicly responded to the criticism for the first time, saying he was «very disappointed in Elon.»

Musk on the same day wrote on social media that without him, «Trump would have lost the election.» In response, Trump stated that the easiest way to save billions of dollars in the U.S. budget would be to «end government subsidies and Ilon contracts.» And Musk responded that his company SpaceX would «immediately begin decommissioning» the Dragon spacecraft, which is used for NASA missions. Hours later, however, the billionaire softened his stance.

The White House scheduled a phone conversation between Trump and Musk on Friday, reported Politico, citing sources. However, Trump stated to CNN that he had no plans to communicate with Musk.

«No. I won't talk to him for a while, I suppose, but I wish him well. I'm not even thinking about Ilona. He's got a problem. The poor guy has a problem,» the US president told CNN.