Tesla Inc. TSLA shares have been under pressure due to the soft patch the company is witnessing amid inclement economic and geopolitical conditions.
What Happened: Morgan Stanley analyst and Tesla bull Adam Jonas lowered his price target for Tesla shares from $350 to $330 but maintained his Overweight rating and continued to position the name as a core holding.
Tesla’s increasingly large size makes it susceptible to profound swings in consumer strength and EV affordability, Jonas said in a note. The first indications of a consumer slowdown will be in the form of reduced order backlots and shrinking order-to-delivery periods, Jonas added.
The analyst noted that Morgan Stanley’s long-term unit volume forecast is 3.25 million units by 2025 and 7.7 million by 2030, implying a compounded annual growth rate of 25%. This is half as much as the 50% growth Tesla is targeting.
Intensifying price competition in China could raise market concerns about the order intake of the flagship models of major EV makers going into the peak season, Jonas said. The analyst estimates that Tesla generates about half of its profitability from the China market, making the stock a derivative of a Chinese tech stock.
“The broader arc of Sino-US economic relations and the evolving geopolitical situation will continue to add volatility to Tesla shares,” the analyst said.
Of the $20 price target cut, $4 is attributable to core auto business and $18 to a lower valuation of Tesla Network Services due to lowered estimates on terminal growth and higher execution discount, partially offset by a $2 upward adjustment for Tesla Energy.
Price Action: Tesla closed Monday’s session at $211.25, down 1.49%, according to Benzinga Pro data.
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