Bernstein tech analyst's best idea for 2024 is to short Tesla

Published Fri, Dec 8 202311:01 AM ESTUpdated Fri, Dec 8 202311:44 AM EST

Tesla 's stock has surged in 2023 but a Bernstein analyst's best idea for next year is to short sell the electric vehicle maker, defying Wall Street consensus. Toni Sacconaghi argues Tesla faces significant downside risks next year as it comes under growing pressure from competitors. The electric carmaker has a demand problem due to a narrow range of expensive vehicles — the Model 3 and the Model Y — that are running into market saturation, Sacconaghi wrote in a note Friday. "Unfortunately, this dynamic is likely to persist, given that we do not expect Tesla to introduce a new high volume offering until 2026," Sacconaghi wrote in a note Friday. Tesla's stock has nearly doubled this year, delivering major returns for investors. But Bernstein sees a rocky road ahead, rating the stock as underperform with a stock price target of $150, implying 38% downside from the last closing price of $242.64. Sacconaghi is going against the grain, rating Tesla far below Wall Street's average price target of about $243, according to FactSet. With 43% of analysts rating Tesla a buy, and another 43% at a hold, Sacconaghi argues that the consensus view is simply too high. TSLA YTD mountain Tesla shares have nearly doubled year to date. Tesla's latest offering, the Cybertruck, has a small market and if anything, it will put incremental downward pressure on Tesla's gross margins to the tune of 100 basis points in 2024, according to Sacconaghi. Tesla already had to dramatically slash prices 16% in 2023 to stimulate demand and will have to do so again in 2024, Sacconaghi wrote. The analyst dismissed "incredulous" consensus estimates that Tesla will grow volume by more than 400,000 units, hold prices flat and boost its gross margins more than 200 basis points. Rather, Tesla's delivery and revenue estimates will come down "materially" in 2024 and 2025, Sacconaghi wrote. Earnings revisions did not affect the stock this year but that will change in 2024, he said. "Our belief is that Tesla's valuation has been supported by growth expectations, even as margins have eroded," Sacconaghi wrote. "We believe a waning of the growth narrative could weigh on the stock's multiple." Bernstein is forecasting earnings per share of $2.54 in 2024, compared with the consensus of $3.34. To sell a stock short, investors borrow shares on the hunch the stock price will fall. If it does, the investor buys the shares at the lower price and pockets the difference. However, if the stock's value increases, the seller will suffer a loss.