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Tesla Inc. is no longer a red-hot growth stock. CEO Elon Musk\u00a0has said<\/a>\u00a0as much.<\/p>\n But even by that new standard \u2014 with growth forecasts on Wall Street sinking rapidly \u2014 the grim sales prediction from a key Tesla analyst on Wednesday was still shocking. There\u2019ll be zero growth in sales volumes for the electric-vehicle maker this year, Wells Fargo\u2019s Colin Langan said. And in 2025, it\u2019ll be worse yet: volumes will drop.<\/p>\n Shares of the company reacted appropriately, dropping 4.5% to close at a 10-month low of $169.5 on Wednesday. The stock has now fallen 32% this year, missing out on a broader rally that has pushed the S&P 500 Index up 8.3%.\u00a0<\/p>\n The reason is clear: Tesla\u2019s ability to grow at the furious pace that its expensive valuation promises is no longer a guarantee. The company still trades at a multiple that is significantly higher than other mega-cap high-flyers, yet the pace of\u00a0expansion<\/a>\u00a0in its revenue and profit have slowed markedly since last year.\u00a0<\/p>\n \u201cRight now, the market is voting and telling us that it believes Tesla does not currently deserve that high valuation,\u201d Adam Sarhan, founder and CEO of 50 Park Investments, said in an interview. \u201cFor now, the sellers are in control and the market needs a bullish catalyst to get excited about.\u201d \u00a0<\/p>\n Wall Street has been\u00a0ringing the alarm bell loudly<\/a>\u00a0on Tesla since the beginning of March, after disappointing numbers from China, data from European countries and a production\u00a0disruption<\/a>\u00a0at its factory near Berlin pointed to first-quarter deliveries missing analysts\u2019 average expectations.\u00a0<\/p>\n Musk\u2019s response \u2014 lowering prices to boost demand \u2014 is losing its edge as well.\u00a0<\/p>\n Wells Fargo\u2019s Langan was the latest to note that the company\u2019s growth in its core markets has moderated, as he downgraded the stock to the equivalent of a sell rating on Wednesday. \u00a0<\/p>\n The EV-maker is now a \u201cgrowth company with no growth,\u201d Langan wrote in a note to clients. He highlighted that sales volumes rose only 3% in the second half of 2023 from the first half, while prices fell 5%. Tesla has cut prices in China\u00a0repeatedly<\/a>\u00a0since late 2022, sparking an international price war.<\/p>\n The troubles for Tesla and EVs more broadly started emerging in mid-October, when Musk\u2019s company first warned about a slowdown in demand. But sentiment worsened further in early January after Tesla said its growth will be\u00a0\u201cnotably lower\u201d<\/a>\u00a0this year. Other automakers, EV suppliers and even rental-car companies joined in with similarly cautious comments.<\/p>\n While the weakness in EV demand spells trouble for all car companies, as a pure-play EV company with an eye-wateringly high valuation, Tesla shares have taken a serious hit.\u00a0<\/p>\n Tesla\u2019s steep slide this year has wiped off more than $245 billion from the company\u2019s market value, and pushed it off the list of the 10 biggest companies on the S&P 500. It\u00a0has also cost Musk<\/a>\u00a0his \u201cworld\u2019s richest man\u201d status \u2014 he is now placed third, behind Bernard Arnault and Jeff Bezos.\u00a0<\/p>\n Despite the decline, the stock still trades at around 55 times its forward earnings, compared to the average of about 31 for the Bloomberg Magnificent 7 Price Return Index.\u00a0<\/p>\n \u201cWhile an EV and battery technology leader, Tesla screens poorly relative to Mag 7 peers,\u201d Wells Fargo\u2019s Langan said, noting the valuation discrepancy.\u00a0<\/p>\n The analyst lowered his 2024 profit estimate for the company to $2 a share from $2.40. That compares to analysts\u2019 average expectation of $3.03 a share for the year, according to data compiled by Bloomberg.<\/p>\n \u201cFor the longest time, Tesla has been heavily invested in one of the market\u2019s favorite narratives, the electrification of the world\u2019s car fleet,\u201d said David Wagner, portfolio manager at Aptus Capital Advisors. \u201cNow, the market\u2019s favorite narrative is artificial Intelligence and ESG has taken a bit of a back seat, thus the historical valuation premium may no longer be warranted, especially as future revenue growth and margin have slowed.\u201d<\/p>\n<\/div>\n\nSubscribe to the Eye on AI newsletter to stay abreast of how AI is shaping the future of business. Sign up<\/a> for free.<\/div>\n