Wall Street Optimistic on Magnificent Seven, Except for Tesla's 2024 Outlook

Wall Street is bullish on the performance of the "Magnificent Seven" stocks in 2024, except for Tesla. The group, which led the 2023 market rally, is expected to continue its upward trend. However, analysts anticipate challenges for Tesla, projecting it to be the only laggard among the seven giants in the coming year.

Tesla's 2023 Success Faces 2024 Challenges

Despite a remarkable 130% surge in 2023, Tesla's outlook for 2024 hints at challenges. While the electric vehicle (EV) leader played a significant role in propelling the S&P 500 to near-all-time highs, concerns arise from a notable drop in profit margins during the latter part of 2023. The company's series of price cuts throughout the year contributed to this decline.

Analysts' Concerns and Projections

Bernstein analyst Toni Sacconaghi expressed concern about Tesla's valuation being supported by growth expectations despite eroding margins. The outlook for 2024 indicates a potential material decrease in delivery and revenue estimates. FactSet reports anticipate a 25% drop in earnings for 2023, with 2024 earnings per share expected to fall 6% to $3.83, despite a projected 45% revenue increase to $118.5 billion.

Challenges in EV Market and Global Competition

Tesla faces intensifying competition in the EV market, especially in China, where local heavyweight BYD unofficially became the largest seller of all-battery electric vehicles globally. The fourth quarter saw BYD delivering 526,000 all-electric cars, surpassing Tesla's expected 480,000 units.

Broader Market Outlook for 2024

While Wall Street remains cautiously optimistic about Tesla, a broader market rally is anticipated in 2024. The S&P 500, just 0.6% shy of a new record high, is poised to expand momentum after the Federal Reserve's confirmation of plans to ease monetary policy. Predictions for the S&P 500 in 2024 range from exceeding 5,000 points by year-end to concerns about recessionary risks and fading consumer strength.

Despite the overall positivity in the market, Tesla's 2024 journey is expected to be challenging. Analysts project headwinds for the EV giant, emphasizing the need for cautious optimism in the face of potential obstacles.