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Morgan Stanley’s Adam Jonas is the latest analyst to express concerns about Tesla (TSLA). In a note to his clients, Jonas wondered: “Could Tesla be in the red this year (someday)?”
In lowering his price target from $345 to $320 (still one of the most bullish targets in the market), Jonas cited continued lag in EV demand despite the price drop, as well as fleet businesses such as Hertz. He cited concerns that many people are selling EVs and that “strong hybrid momentum” is fading. Potential people who are unsure about purchasing an EV.
Jonas said Tesla could report a GAAP EBIT (earnings before interest and taxes) loss on its auto business in 2024. As a result, Tesla shares are falling in today’s trading, marking their third consecutive year of declines. Day.
Key concerns for Morgan Stanley and Jonas are “relatively old” products, slowing EV demand in key markets, an oversupplied Chinese market and a hybrid renaissance.
The Chinese market is worth watching given recent price cuts by Tesla and its main rival BYD, with the Chinese EV maker lowering the prices of its entry-level Seagull and Yuan Plus crossover vehicles this week. . “We believe price competition will continue into 2024, and OEMs will increase cost-cutting efforts.” [in China]” Jonas wrote.
These factors led Jonas and his team at Morgan Stanley to lower their estimates for Tesla’s key metrics.
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In 2024, sales will drop to less than 2 million units, or about 10% growth compared to the previous year.
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GAAP operating margin decreased from 5.9% in FY24 forecast to 3.7%
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FY2024 GAAP EPS decreased to $0.99 from $1.54 previously.His non-GAAP EPS was reduced to $1.51 from his previous $2.04
Jonas wrote that the downside price target is based on the following reductions: A $5 cut due to lower sales growth, a $10 cut due to lower profit margins, and a $10 cut due to slower growth in Tesla’s mobility initiatives such as ride-sharing and self-driving.
That said, Jonas is still overweight Tesla stock because he’s betting on Tesla’s product areas outside of EVs.
“Our thesis about Tesla is that it’s a car stock, but it’s also an energy and AI/robots company,” Jonas said. “We believe investors should not ignore the continued development of Tesla’s other businesses, many of which are automotive-related (i.e., Tesla Fleet, which is incorporated into the Tesla Network Services valuation). (recurring revenue opportunities from) and other areas that we do not include in our valuation scope.” Our target is $320, but the market may include (i.e. Optimus). ”
AI company OpenAI claimed on Tuesday that Elon Musk once tried to merge OpenAI with Tesla, which would have created an AI giant. Musk was an early investor in OpenAI, but eventually filed a lawsuit accusing OpenAI of prioritizing profits over creating public goods.
Pras Subramanian is a reporter for Yahoo Finance.you can follow him twitter And even more Instagram.
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