Tesla (NASDAQ: TSLA) stock fell over 2% on Wednesday after Morgan Stanley issued a bearish outlook amid a challenging period for EVs.
Morgan Stanley analysts have taken a bearish stance on Tesla (TSLA) stock, slashing earnings estimates and the price target. They attribute this adjustment to a slowdown in electric vehicle (EV) demand, which they believe persists despite ongoing price cuts.
The revised 12-month target price is now $320, down from the previous $345, and analysts have also reduced their GAAP earnings per share (EPS) forecast from $1.54 to $0.99.
In a statement, the analysts expressed concern, suggesting that Tesla might face the possibility of posting a GAAP EBIT loss in the auto business this year.
The primary reason behind these downward revisions is dwindling demand, especially in regions less conducive to EV adoption, such as suburban areas outside major cities like Dallas or Cleveland. In places like California, where EV penetration has reached 25%, similar to China, growth has slowed considerably.
Moreover, the Chinese EV market is experiencing oversupply, leading to price cuts by manufacturers like BYD of up to 20% for new models. This trend indicates a competitive landscape for Tesla in 2024.
The analysts said,
“We expect Tesla’s 1H24 results to come in below expectations on profitability, with GAAP OP margins in the 2-3% range, implying underlying EV manufacturing margins (ex downstream retail and ZEV credits) to be potentially in the red.”
They wrote,
“In response to falling profitability, we anticipate Tesla will pull back on price cuts to defend margins and cash flow.”
Tesla (NASDAQ: TSLA) Stock Movement
TSLA stock declined 2.32% to close at $176.54 on Wednesday. The traders had exchanged hands with 106,831,706 (106.83 million) shares compared to the average daily trading volume of 108.73 million.
