Morgan Stanley auto analyst Adam Jonas has cut his price target on EV leader Tesla from $380 to $345, citing expectations of a “cautious outlook” for 2024. Jonas believes the global EV market is currently oversupplied compared to demand, leading to stalling momentum. With Tesla set to report Q4 earnings this Wednesday, January 25th, analysts are bracing for a weak forecast, is Tesla’s growth really stalling out?
Jonas still has one of the most bullish price targets on Tesla at $345, but he has cut his 2024 earnings estimate to below $2 per share, which would be the lowest on Wall Street. Jonas believes only $75 of his $345 price target is attributed to Tesla’s core auto business, with the rest tied to its energy, AI and robotics potential. This confusing mismatch between a bullish price target and bearish earnings outlook has the Morgan Stanley sales team scratching their heads.
So what’s really going on? The global economy is clearly slowing, inflation remains stubbornly high, and consumers are more hesitant about big purchases like cars. This is leading to swelling inventories and promotions in the auto industry. But is this temporary or a sign of peak market saturation for EVs?
While the EV market is certainly maturing from its early hyper-growth stage, robust demand trends remain in place as EV technology improves and prices become more affordable. Tesla still leads all automakers in EV sales and technology. The company is continuing to rapidly expand production capacity for industry-leading vehicles like the Model 3 and Model Y.
Competition is heating up, but Tesla maintains key advantages in vertically integrated manufacturing, battery tech, charging network, and software. Tesla is far ahead of rivals when it comes to over-the-air software updates and Full Self Driving capabilities. This allows the company to generate high-margin revenue streams and gather data for AI learning no one else comes close to.
As Tesla continues expanding output in Austin, Berlin and Shanghai, global demand should absorb elevated production levels. Consumer interest in EVs remains strong with gas prices still high and environmental awareness growing. While Tesla’s growth is certainly moderating from the heady triple-digit rates of the past, the company looks poised for steady expansion in the 20%-30% range going forward.
The EV revolution still has a long runway ahead. Tesla remains the trailblazer leading the way. While the road may get bumpy in 2024 amid macro uncertainty, the long-term runway for Tesla and EVs overall remains intact. Jonas’ cautious near-term outlook seems prudent, but his long-term bullishness on Tesla makes sense given their pole position in the fast-growing EV market.
Related Post: Morgan Stanley’s Adam Jonas new $TSLA note, Tesla 2024 : Another Volatile Idiosyncratic Year