Tesla stock (TSLA) has soared through the first half of the year causing an increasing number of analysts to call a top on the electric vehicle maker's surge back toward all-time highs.
Late Sunday, Goldman Sachs analyst Mark Delaney became the third Wall Street analyst to downgrade Tesla in less than a week.
Delaney downgraded Tesla to Neutral from Buy while boosting his price target from $185 to $248. Delaney's move reflects a common theme in the downgrades: Tesla stock has done so well that it's hard to see it doing better to close out the year.
"We believe the stock now better reflects our positive long-term view of the company’s growth potential and competitive positioning post the substantial move higher YTD," Delaney wrote in a note on Monday.
Morgan Stanley's Adam Jonas put it simply: "I did not see this 111% YTD rally coming." It's an understandable stance from Jonas after a 2022 that saw Tesla shares fall nearly 70% as its CEO Elon Musk purchased a social media company and the EV maker began to lose market share to competitors.
Even Wedbush Securities managing director Dan Ives, a longtime Tesla bull, entered 2023 skeptical. He moved his price target down to $175 from $250 on December 22, 2022, writing in a note: "At the same time that Tesla is cutting prices and inventory is starting to build globally in face of a likely global recession, Musk is viewed as 'asleep at the wheel' from a leadership perspective for Tesla."
In the first six months of the year, sentiment has snapped back in Tesla's favor in a massive way. The company instituted multiple price cuts that the Street regarded as necessary to reinvigorate demand, and its fourth quarter results came in better than expected.
Then came a new CEO at Twitter, several supercharging licensing partnerships, and an artificial intelligence boom in stocks. All combined to send shares up more than 100% on the year.
Bulls like Ives are back beating the drum, most recently writing the EV automaker has built an "EV castle," referencing the growing paths for revenue such as the supercharger network that now includes partnerships with key competitors like Ford (F), General Motors (GM), and Rivian (RIVN).
But some analysts are questioning how long-lasting some of the current growth drivers will be. Jonas at Morgan Stanley highlighted that the AI-related positive stock action could be a concern.
"While we understand why Tesla gets a serious mention in an AI conversation, we believe a re-rating on this theme is in the realm of the non-disprovable bull case," Jonas wrote. "Autonomous driving and generative AI still remain, in our view, two very different technological disciplines. While the market may want to dream on the AI theme, we'd prepare to wake up to the sound of a blaring car horn."
Barclays analyst Dan Levy agrees with Jonas that the AI narrative has likely been too far priced into Tesla's stock. Levy downgraded Tesla to Equal Weight from Overweight on June 21.
"While we aren’t surprised that the stock has participated in the rally, we believe it is prudent to move to the sidelines," Levy wrote.
He pointed to key fundamental factors that had weighed on the stock prior to the AI rally, like margin concerns amid price cuts.
Investors will look for further hints on how Tesla's demand is reacting to those price cuts during the upcoming holiday week. Tesla usually reports its quarterly deliveries for the second quarter on July 2.
After delivering 422,875 vehicles in the first quarter, Wall Street analysts expect Tesla to report deliveries of 448,599 for the second quarter, per Bloomberg consensus data.
Josh is a reporter for Yahoo Finance.
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