Electric car maker Tesla is now at the center of a bearish analyst report from one of its biggest fans of the past, Morgan Stanley, which lowered Tesla's price target. Tesla, the world's largest electric car maker, is in trouble in 2023 as high inflation combined with a slow credit environment slows sales. Now, Morgan Stanley believes Tesla will face more pain this year, and the bank lowered its price target for Tesla by 9.2% to $345 from the previous price of $380.
Morgan Stanley downgrades Tesla, saying global electric vehicle market is facing supply and demand mismatch
2024, although it is less than a month old, is already a controversial year for Tesla. Earlier this year, Tesla CEO Elon Musk shared on X that Tesla’s ownership structure made him uncomfortable expanding the company into a leader in artificial intelligence and robotics. Unlike traditional car companies like Ford, Musk's Tesla runs one of the world's largest supercomputers and is also building humanoid robots as part of its self-driving project.
Both are high-growth industries, and a large portion of Tesla's $664 billion market capitalization is based on the trove of driving data it controls.
Morgan Stanley said in its note that it was adjusting its valuation of Tesla in light of possible troubles ahead. However, the company also explicitly mentioned artificial intelligence and robotics in the note, suggesting that Musk is on the right track, at least in the eyes of Morgan Stanley's Adam Jonas.
The full description provided by StockTalk is as follows:
The market supply exceeds demand. We expect Tesla's sales and profitability outlook to be cautious in 2024. We lower Tesla's FY24 non-GAAP EPS to below $2. EV development is tough, but we remain bullish on the possibilities of artificial intelligence and robotics. Tesla will announce its fourth-quarter financial results on January 24 (Wednesday). We hope to market our performance expectations for FY24 and FY25 in advance. There is increasing evidence that the global electric vehicle market is in an unfavorable situation due to an imbalance between supply and demand (growth).
The article also mentioned that Tesla’s earnings conference call will be held later this week. The company’s third-quarter financial report showed that its revenue was US$23.35 billion, which was lower than analysts’ consensus expectations. Tesla delivered 484,507 vehicles in the fourth quarter of 2023, ending on a strong note. The new record came despite Musk complaining on the third-quarter earnings call that high interest rates were impacting costs and demand.
So far, Tesla shares appear unaffected by Morgan Stanley's bearish view and were little changed in premarket trading. Although Morgan Stanley lowered Tesla's price target to $345, compared with Tesla's latest stock price of $212, Morgan Stanley's expected price still has room for 63% upside. Analysts expect Tesla's 2024 vehicle delivery target to exceed 2 million vehicles, and Tesla has recently passed on lower commodity costs to consumers by lowering vehicle prices.