William Blair downgraded Tesla

William Blair downgraded Tesla (NASDAQ:TSLA) to Market Perform from Outperform due to policy changes and declining regulatory credits posing risks to demand and profitability. Shares fell over 7% intra-day. Removal of EV tax credit and unexpected elimination of CAFE fines threaten over $2 billion in annual profits tied to regulatory credit sales.

Loss of regulatory credit revenue is expected to directly impact profitability, prompting analysts to reset earnings models. William Blair believes these headwinds will weigh heavily on Tesla shares, leading to the downgrade to Market Perform as the stock’s risk/reward profile deteriorates.