Earlier this year, Tesla (TSLA) fell out of the ranks of the seven largest weighted stocks in the S&P 500 index, and now, Tesla has also dropped out of the top ten.

Tesla closed down 2.3% on Wednesday (March 6th), at $176.54, while the S&P 500 index and the Nasdaq Composite index rose by 0.5% and 0.6% respectively. Over the past three trading days, Tesla has accumulated a decline of about 13%, according to Dow Jones Market Data, marking the largest three-day consecutive drop since the one ending on October 20, 2023, when Tesla fell 16.8% over three trading days.

Currently, Tesla's market capitalization is around $553 billion, which briefly fell just below Visa's (V) $563 billion, indicating that the credit card company has replaced Tesla as the tenth largest company by market cap, the first time Tesla has fallen out of the top ten since January 2023.

In pre-market trading on Wednesday, Tesla was poised to break the two-day losing streak until news came that one of Tesla's biggest bulls, Morgan Stanley analyst Adam Jonas, downgraded Tesla's target price and earnings forecast.

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In a research report released on Tuesday evening, Jonas wrote: "This year is a challenging year for the electric vehicle industry... Despite ongoing price reductions, demand continues to decelerate." Furthermore, he referred to Tesla's product lineup as "relatively stale," the Chinese electric vehicle market as "over-supplied," and pointed out that the threat of hybrid vehicles to electric vehicles is greater than previously imagined.

In light of this, Jonas lowered his expectation for Tesla's earnings per share to below $1 (under Generally Accepted Accounting Principles). Data from FactSet shows that the current Wall Street consensus for Tesla's earnings per share is $2.86.

What's worse, Jonas now estimates that Tesla's deliveries in 2024 will be less than 2 million vehicles, growing by about 10% from the 1.8 million in 2023, but below Wall Street's forecast of 2.1 million. Jonas reduced Tesla's target price from $345 to $320, but maintained the "buy" rating.Investors have been concerned about Tesla's delivery situation in 2024 for some time, and Gary Black, co-founder of Future Fund Active ETF, pointed out that this has been the biggest factor affecting the stock price over the past two days.

Black said: "I believe Wall Street analysts may revise down their Q1 delivery estimates from the current 475,000 to 435,000 to 450,000 units." Black noted that a slow start to China's electric vehicle market this year, the EU's reduction in electric vehicle incentives, and the suspension of production at the Fremont factory in California are all contributing factors.

Expectations are declining:

From December 6, 2023, to March 5, 2024, there has been a change in Wall Street's forecast data for Tesla's Q1 deliveries.

Black has already revised down his forecast for Tesla's deliveries this year. After visiting Tesla's factory in Austin, Texas, he revised his 2024 delivery forecast from 2.1 million units to 2 million units.

If there is any good news for investors, it is that Tesla's stock price has already reflected the concern that analysts may revise down their earnings expectations.

One piece of good news that investors can seize is the recent meeting between Musk and former U.S. President Trump. The specifics of this meeting are still unclear, and Tesla did not respond to the reporter's request for comment.

For the entire electric vehicle industry, this could be a significant event. Trump has made some sharp remarks about electric vehicles in the past, and if he can be convinced that electric vehicles are beneficial to the American automotive industry and American workers, it would help to eliminate the Republican Party's dislike for the electric vehicle industry, which is a disadvantage.

In addition to the revision of earnings expectations, investors are also paying attention to more price competition in the Chinese market. According to The Wall Street Journal, BYD, a Chinese electric vehicle manufacturer invested in by Warren Buffett, has reduced the price of its entry-level Seagull sedan upgrade by 5%.

Just a few days ago, Tesla offered Chinese consumers who purchased the rear-wheel-drive versions of the Model 3 and Model Y a $1,000 insurance subsidy.Jonas pointed out in the research report that price competition and oversupply in China's electric vehicle market are the two reasons for Tesla's operating profit margin dropping from around 17% in 2022 to around 9% in 2023.