Morgan Stanley analyst Adam Jonas believes an EV market “recession” is coming, but feels like an EV giant Tesla, Inc. TSLA it will come out stronger, thanks to its investments in the AI sector.
Analyst Recommendation: “The global EV slowdown has entered the next phase of Darwinian change… We think Tesla won’t let a good ‘EV recession’ go to waste,” Jonas wrote.
The analyst reiterated his “overweight” rating on Tesla with a price target of $310.
“In fact, our valuation of the core automotive business ($62 per share) represents only 20% of our $310 price target,” he said.
Jonas argued that the ongoing EV slowdown has turned into an EV recession, highlighted by layoffs, allegations of devaluation, revised EV targets, increased collaboration among competitors, and even the exit of smaller operators . According to Jonas, electric vehicle company now delisted Fisker he’s just the first of many players to be pushed to the brink.
More Tesla layoffs on the way? Tesla laid off more than 10% of its global workforce on Monday. But it won’t be the company’s last, according to Jonas.
“We expect Tesla’s announced headcount cuts to potentially exceed the announced 10% as delivery growth has fallen from 50% to negative,” Jonas said in his note.
Other legacy issues: The analyst suggested that traditional automakers’ goals for electric vehicles to make up 50% or even 100% of their models by 2030 or 2035 could be revised significantly downward, perhaps to 90% or more . “A large, traditional automotive company exposed to the U.S. might be content with 5% or 10% of its mix being BEVs by 2030,” she said.
“We expect traditional automotive companies to work together in ‘Airbus’-style consortia,” Jonas added. “We are looking for OEMs… to collaborate with Chinese automotive and battery partners as an on-ramp to Western automotive markets.”
Potential Tesla AI: Jonas said he remains “overweight” on Tesla because it has significant attributes to be valued as an AI company thanks to its ventures in energy storage, self-driving technology and humanoid robots, but must first stabilize earnings in its business automotive.
This stabilization, he said, may take a few more quarters and will have a short-term negative impact on the stock price.
Tesla Deliveries: Tesla reported an 8.5% year-over-year decline in first-quarter deliveries to 386,810 vehicles, marking the first time the company has seen such a decline in about four years. These disappointing deliveries weigh heavily on first-quarter results that are expected to be announced on April 23.
Price Action: Tesla shares closed nearly 1% lower at $155.45 on Wednesday, then fell nearly 0.5% after the close, according to data from Benzinga Pro.
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To know more: No more discounts on Tesla car inventory as CEO Elon Musk says sales system has become ‘complex and inefficient’
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