Mizuho has downgraded its ratings for Tesla (TSLA), Rivian (RIVN), and Nio (NIO) from Buy to Neutral, citing slowing demand for electric vehicles, particularly in China. The investment bank also mentioned high inventory levels as potential headwinds.
Yahoo Finance's Akiko Fujita and Josh Lipton break down the details.
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Editor's note: This article was written by Angel Smith
Video Transcript
AKIKO FUJITA: Mizuho downgrading multiple EV stocks. Tesla, Rivian, and NIO all now rated neutral despite expecting long-term gains. Analysts warning demand increasing inventories and liquidity issues are creating challenges into the next year.
They've sort of highlighted these companies separately. But really there is the overall theme that we've been talking a lot about, which is that, yes, EVs adoptions are still growing, but not at the rate where it has been. You look at where they expect it to be.
EV growth now expected to be 15% year on year. That's compared to 25% where it was before. So, yes, 15% not so bad. But when you compare it at how quickly it's grown. Certainly, not good news for those companies.
And then when you think about what's been playing out in a market like China, the price cut war. Obviously, we've seen that in the US as well. But that's going to continue to weigh on margins for these companies.
JOSH LIPTON: Yeah, and specifically on Tesla, it was interesting. They said, listen, Tesla remains the global leader. No doubt. But then they just rattle off this list of worries they have, Akiko, moderating growth, China competition, you mentioned higher inventory.
Stocks already been shelved. It's about down about 30% this year. But they clearly think not all the bad news is priced in.
AKIKO FUJITA: Yeah. And you have to wonder a name like Tesla, I mean, certainly, that is the EV player that investors have been going to. But there is increasing competition. At the same time, we have seen more and more challenges with names like Rivian, the upstarts, the other EVs that, look, they have the cars out there. But they don't have the runway right now. And there's questions about whether, in fact, they can continue to grow with the cash they have on hand.
JOSH LIPTON: And by the way, Mizuho does have some names they still like by the way. Maybe they got a kind of lukewarm on a few EV makers. They did say they still like GM. That's a buy their targets 48.
AKIKO FUJITA: But it goes back to the legacy names that are continuing to be in favor of a lot of these analysts when you think about where the short-term trajectory is at least for EVs.
JOSH LIPTON: For sure.