Morgan Stanley analyst Adam Jonas on Tuesday highlighted both product and market issues, dramatically cutting target price and FY24 earnings estimates for the electric vehicle giant Tesla Inc TSLA.
Analyst Rating: The analyst cut his price target from $345 to $320, while maintaining his ‘overweight’ rating.
Tesla’s thesis: In a note, the analyst highlighted the many negatives plaguing Tesla right now, including declining demand for electric vehicles, an older product line compared to other automakers, stiff competition, and price wars. in China and, last but not least, the growing popularity of hybrids over hybrids. battery electric vehicles in the company’s core market, the United States.
“If ever there was a time when Tesla could potentially post a GAAP EBIT loss in the auto industry, it might be this year,” Jonas wrote.
The analyst said he expects the EV giant’s first-half results to fail to meet expectations, with GAAP operating margins between 2% and 3%. After taking a hit to profitability, Jonas expects Tesla to reverse the price cuts he implemented to boost sales and instead shift focus to defending margins and cash flow.
The analyst also changed his estimates for fiscal 2024.
Change in estimates: Jonas reduced its unit volume estimate for FY24 to less than 2 million units, implying growth of just over 10% year over year. The analyst now expects an automotive gross margin of 11.4% for the year, down from his previous estimate of 13.2%.
But despite this, the analyst remains overweight Tesla as he continues to view it as an AI company. However, for the electric vehicle giant to gain credit as an artificial intelligence company, it must first stabilize its auto earnings, he said.
“We don’t believe Tesla will get credit as an AI company as long as major auto earnings are revised downward. This process may take a few more quarters to complete, during which time our $100 bear case could be “in play,” she wrote.
Price Action: Tesla shares closed 3.9% lower at $180.74 on Tuesday, according to data from Benzinga Pro.
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