Tesla Inc. (TSLA) saw its stock fall nearly 4.3% in early trading, reversing gains after an analyst downgrade overshadowed a raised price target. The move reflects growing concerns over near-term growth prospects despite long-term optimism.
- TSLA stock declined 4.3% to $187.42 despite a price target increase to $235
- Analyst downgrade to 'Hold' reflects concerns over Q3 delivery shortfall (445k vs. 460k expected)
- Gross margin fell to 17.2% in Q3 2025, down from 19.1% in Q2
- Net equity outflows from Tesla-focused funds reached $1.8 billion in four weeks
- Market impact extended to ARK ETF (-2.1%) and Nasdaq-100 (-0.6%)
- Forward P/E of 22.5 is below 5-year average of 28.3
Tesla's stock dropped to $187.42 in midday trading, marking a 4.3% decline, after a major investment firm issued a downgrade on the company. The analyst maintained a 'Hold' rating but increased the 12-month price target from $210 to $235, citing improved efficiency metrics and battery technology advancements. Despite the positive price target, the downgrade signaled skepticism about Tesla's ability to sustain vehicle delivery growth in 2026 amid intensifying competition in the electric vehicle market. The downgrade follows a broader reassessment of Tesla’s near-term fundamentals. Deliveries in Q3 2025 came in at 445,000 units, below the 460,000 expected by analysts, contributing to the negative sentiment. Meanwhile, the company’s gross margin fell to 17.2% in the latest quarter, down from 19.1% in Q2, driven by aggressive pricing in Europe and China. These metrics suggest margin pressure is mounting, even as production at the Gigafactories in Texas and Berlin continues to expand. The market reaction highlights a divergence between long-term valuation optimism and short-term operational risks. Institutional investors have begun trimming positions, with net equity outflows from Tesla funds totaling $1.8 billion over the past four weeks. The move also affected broader EV and tech indices, with the ARK Autonomous Technology & Robotics ETF declining 2.1% and the Nasdaq-100 retracing 0.6%. The stock is now trading at a forward P/E of 22.5, below its 5-year average of 28.3, suggesting potential undervaluation for long-term holders. However, investor focus remains on execution, with analysts emphasizing that sustained innovation and cost management will be critical to reversing the downward momentum.