A California judge has denied Tesla’s (NASDAQ:TSLA) request to dismiss a class action lawsuit alleging that the company misled customers about its driver-assistance features. Consequently, the case will proceed to trial. TSLA stock declined over 2% in yesterday’s regular trading session.
The lawsuit relates to the California Department of Motor Vehicles (DMV) investigation of TSLA’s Autopilot and Full Self-Driving features. The DMV stated that Tesla’s advertising overstated the capabilities of these driver-assistance systems. It should be mentioned that the DMV is seeking remedies that include the suspension of Tesla’s license to sell vehicles in California and providing compensation to vehicle owners.
Importantly, the company has been under regulatory scrutiny due to its self-driving systems’ misleading advertising practices and their role in fatal crashes.
TSLA’s Risk Analysis
Despite its constant involvement in legal troubles, the company has been able to effectively manage its regulatory risks. Interestingly, Tesla’s legal and regulatory risks constitute 17.5% of its total risks, which is slightly below the sector average of 18%.
Is Tesla a Buy, Sell, or Hold?
Given the near-term demand headwinds and pressure on margins, Wall Street remains sidelined on TSLA stock. It has nine Buys, 14 Holds, and nine Sell recommendations for a Hold consensus rating. The analysts’ average price target on Tesla stock of $172.92 implies a marginal downside of 0.5% from current levels.
