Tesla stock falls 2.4% as BNP Paribas cuts rating to Underperform

Highlights

- Tesla dropped 2.4% to $425 after BNP Paribas set a $307 price target, implying 29% downside.

- The bank raised concerns over Tesla’s reliance on future AI-driven revenue streams that currently generate no income.

- Technical indicators show weakening momentum, with $400 as a critical support level in the near term.

Tesla is now trading below the 20-day and 50-day moving averages, signaling short-term bearish momentum. The 100-day moving average, currently near $412, may act as the next line of support, while the 200-day moving average remains further below near $385, offering a more substantial floor if selling accelerates. Short-term resistance now lies near $440, where the stock was repeatedly rejected last week.

Volume has picked up on down days, a negative signal that suggests institutions may be reducing exposure. Momentum indicators, including RSI, have dipped below 45, confirming a neutral-to-bearish momentum profile. Tesla is not yet oversold but is rapidly approaching that zone, which may set up for a short-term bounce. However, unless price action regains the $440–$450 range convincingly, the trend favors continued pressure.

Tesla stock price dynamics (August 2025 - October 2025). Source: TradingView

Key support lies at $400 — a psychological level that also marks the mid-June breakout area. A break below this level would likely trigger algorithmic selling and expose Tesla to further downside, potentially toward the $370–$385 range. The current setup suggests more downside risk unless the broader market provides support or the company releases a positive surprise.

AI bets overhyped, sees 29% downside risk

BNP Paribas initiated coverage on Tesla with an “Underperform” rating, assigning a $307 price target, which implies roughly 29% downside from current levels. The bank’s analysts argue that Tesla’s valuation is overly reliant on future revenues from its AI-focused initiatives, namely the robotaxi platform and Optimus humanoid robot — both of which currently contribute zero dollars to revenue.

According to BNP, market expectations have become detached from near-term fundamentals. The investment case, they argue, is increasingly based on best-case outcomes for unproven technologies. Even their downside scenario already includes an ambitious set of assumptions: a scaled-up robotaxi fleet, over one million Optimus units shipped, and broad FSD (Full Self-Driving) adoption.

The concern is not Tesla’s innovation, but the timeline and margin reality of these future bets. BNP’s note also points to a disconnect between Tesla’s projected free cash flow and consensus expectations. They estimate 2026 FCF could be 50% below current consensus if margin compression and capital intensity persist. With interest rates remaining high and the macroeconomic backdrop uncertain, the bank sees less room for valuation expansion based on speculative future growth.

Downside bias unless key support holds above $400

From a price perspective, Tesla is in a precarious zone. The base case for the next one to three months sees the stock range-bound between $400 and $440, with a tilt to the downside. If it breaks below $400 — a critical technical and psychological level — it may slide toward $370 and potentially $350, especially if volume confirms the breakdown.

In BNP’s bearish scenario, which aligns with lower-than-expected AI monetization and flat growth in core EV deliveries, the $307 target could be tested over a 6–9 month horizon. That would imply a full reset to levels last seen in late 2022. Conversely, for the stock to regain upward momentum, Tesla would need to post a strong earnings beat, provide detailed visibility on AI monetization, or demonstrate significant progress in cost reduction and FSD rollout.

Deutsche Bank’s Edison Yu sees stable U.S. demand for Tesla despite the partial loss of EV tax credits, citing new Standard-range trims as a volume defense strategy. Investors are also watching for news on Tesla’s potential compact EV, the Model Q or Model 2, which could open a major new market segment by 2026.

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