Baird Analysts Lower Rating Citing Near-Term Uncertainties
Baird analysts have downgraded Tesla (NASDAQ:TSLA) to “Neutral” due to “elevated uncertainties” surrounding the company’s near-term prospects. This rating reduction comes despite Tesla’s recent 24% stock price surge following a fundamentally weak quarter, with Baird arguing that “excessively high expectations” for the June launch of more affordable vehicle models and robotaxi services are already fully reflected in current valuations.
Key Factors Behind the Downgrade
The analysts highlighted several concerns driving their decision:
“Excessively high expectations, key man risk, and intensifying competition”
Specific mention of CEO Elon Musk’s relationship with President Donald Trump, which they say “now adds uncertainty and raises questions about potential brand damage”
Classification of Musk’s political activities as representing “key man risk associated with Musk’s political activities”
Expectation that brand concerns will “persist until there is concrete evidence of sustained unit growth”
Robotaxi Service Expectations vs. Reality
Regarding the highly anticipated robotaxi service:
While Musk projects “hundreds of thousands of vehicles on the road by late next year”
Baird’s model only forecasts 6,000 units
Analysts believe the robotaxi business will prove “more challenging (and likely less profitable) than some investors currently expect”
Revised Delivery Forecasts
Baird has also lowered its 2026 delivery estimates to account for the elimination of electric vehicle tax credits:
2025 Q2 delivery estimate: 377,000 units (below consensus of 404,800)
2025 full-year estimate: 1.72 million units (vs. consensus of 1.70 million)
2026 estimate: 2.19 million units (vs. consensus of 2.06 million)
Long-Term Outlook Remains Positive
Despite these short-term concerns, Baird maintains its long-term positive view of Tesla as a “core holding.” The analysts recognize:
“Significant long-term opportunities related to robotaxis and robotics”
Current decision to “wait and see” approach regarding near-term execution
This dual downgrade reflects growing investor concerns about Tesla’s ability to meet heightened market expectations while navigating political risks and intensifying competition, even as the company’s long-term innovation potential remains compelling.
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