Why Shares of Tesla Are Falling to End the Week

Shares of the electric vehicle (EV) company Tesla (NASDAQ: TSLA) traded 3.4% lower, as of 12:18 a.m. ET today. The broader market struggled on Friday due to hotter-than-expected inflation data, and an analyst lowered his price target on the stock.

A reset in volume

The Federal Reserve's preferred gauge of inflation, the Personal Consumption Expenditures index, rose 0.4% from the prior month and came in at 2.8% higher year over year, slightly above estimates. This led to further inflationary concerns, sending most stocks lower.

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Meanwhile, Deutsche Bank analyst Edison Yu issued a report on Tesla Friday morning, maintaining his buy rating but lowering his price target from $420 to $355. Yu lowered his first-quarter delivery estimates for the company from 378,000 to somewhere between 340,000 and 350,000. This number would mean an 11% year-over-year decline in deliveries and represent the lowest number of deliveries since 2022.

He also now sees full-year deliveries coming in at 1.7 million, marking a 5% decline year over year. "The main drivers of the downside are weakness in Europe and the Model Y Juniper changeover," he wrote in his research note.

Tesla has certainly become a battleground stock this year. While the data points to a weak upcoming quarter of deliveries, several analysts are still upbeat on the stock due to the company's expected eventual launch of robotaxis and household robots. But Yu added, "Rarely anything at Tesla happens in a straight line, and we would not expect robotaxi or humanoid to be linear."

Is the stock a buy?

All eyes will be on the first-quarter earnings report in late April to see how deliveries trended. The result could move the stock in a big way. I'm on the sidelines for now since Tesla trades at about 100 times forward earnings, presenting what I believe to be an unfavorable risk-reward ratio.

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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.