In 2024, the "Magnificent Seven," a group of the biggest technology companies, saw most of its members continue their impressive 2023 performance, except for Tesla (NASDAQ:TSLA) stock. Facing a myriad of challenges such as waning sales and growing competition in China, Tesla stock has underperformed the S&P 500 by a wide margin.

Today, Bernstein analysts reduced their price target, suggesting a 30% downside risk for the stock.

Tesla stock weakness

Although Apple (NASDAQ:AAPL) is also one of the underperformers, TSLA has significantly lagged behind Magnificent Seven peers such as Microsoft (NASDAQ:MSFT), Meta Platforms (NASDAQ:META), and Nvidia (NASDAQ:NVDA), which continue to indulge in the ongoing artificial intelligence (AI) frenzy, significantly contributing to the market's overall success.

Notably, Microsoft recently joined the exclusive $3 trillion market value club, while Nvidia became the third most valued company in the world, overtaking Saudi Aramco (TADAWUL:2222).

For Tesla stock, however, 2024 hasn’t been nearly as good, with it plummeting more than 30% since the start of the year. The decline was partly driven by another disappointing earnings report in January, causing a sharp 12% fall in one day, the most significant drop in over a year.

Adding to Tesla's challenges, last week reports emerged of production cutbacks at its Shanghai facility, impacting both domestic and international supply.

This adjustment, which comes due to lackluster sales and intensifying competition in China, has led to reduced working days for employees, as per Bloomberg News. Employees are now working a five-day week, down from the previous schedule of 6 1/2 days, according to the report.

In China, despite a 17% rise in overall passenger vehicle sales and a 37.5% increase in new-energy vehicle sales during the first two months of the year, Tesla experienced a downturn in its deliveries.

According to figures from China’s Passenger Car Association, the company’s vehicle deliveries in the first two months of 2024 totaled 131,812, marking a 6% decrease from the year ago. Furthermore, only 53% of these vehicles were sold in the local market, even after Tesla implemented price reductions at the beginning of the year.

Bernstein cuts stock target

The disappointing performance of Tesla stock this year has resulted in multiple price target cuts among Wall Street analysts, with the latest one coming from Bernstein on Tuesday.

The broker’s analysts cut their target price on TSLA from $150 to $120, citing elevated valuation even after recent declines.

“Tesla’s stock price remains high on almost every valuation metric compared to both traditional and higher-growth auto OEMs, and also looks expensive relative to its reduced growth expectations when measured against tech comps,” they wrote.

“Our DCF now points to fair value of $93 (down from $120), primarily due to lowered estimates for terminal margins, but also due to a push-out in EV adoption growth,” added analysts.

The downward revision is influenced by several factors, Bernstein noted, including comparisons with similar companies, a revised 2050 discounted cash flow (DCF) valuation, an optimistic outlook for the near term, and “partial credit for value from Tesla’s other businesses,” primarily Full Self-Driving (FSD).

“Despite the stock’s underperformance YTD, we struggle to see a catalyst for TSLA. We expect tepid growth in 2024, as well as 2025, bringing into question the company’s growth narrative,” analysts concluded.

Bernstein maintained an Underperform rating on Tesla stock.