Tesla Inc. TSLA shares are going through a lean patch and it has stirred anxiety among retail investors.
The Tesla Analyst: Morgan Stanley’s Adam Jonas has an Overweight rating and $330 price target for Tesla shares.
The Tesla Thesis: Tesla shares are approaching Morgan Stanley’s bear-case price target of $150, dragged by China price cuts, decelerating electric vehicle demand, and other market currents, including Elon Musk’s Twitter buy and the crypto sell-off, analyst Jonas said in a note.
From a near-term high of $313.80 on Sept. 21, the stock has pulled back to a two-year intra-day low of $166.19 on Tuesday, losing about $466 billion or roughly half a trillion in market cap.
The extended weakness has pulled Tesla shares to a two-year low, back to levels where they were when the company was added to the S&P 500 Index, the analyst noted.
The stock currently trades at about 14 times of 2025 enterprise value/EBITDA and 26 times the P/E, he added.
Jonas said he estimates compounded annual growth rates through 2030 of 25% for volume and 23% for revenue, which is half the company’s target of 50%. For 2023, Morgan Stanley models 37% topline growth, stemming from sales of 1.8 million units, and about $15 billion in free cash flow.
The analyst noted that investor sentiment has turned “sharply negative” on the global EV market, especially for China-exposed names. He cited data from Morgan Stanley’s China auto analyst Tim Hsiao that showed China EV sales growth will likely decelerate from 70% in 2022 to 15% in 2023.
Jonas said he continues to recommend Tesla due to the following reasons:
- Tesla’s the only name in Morgan Stanley’s coverage universe to generate a profit before incentives on EV sales.
- It’s the only self-funding pure-play EV name.
- It has secured the necessary supply of the battery metals and related upstream materials needed to produce EVs at a multi-million-unit scale.
- In a slowing economic environment, the gap between Tesla and the competition will potentially widen.
- Tesla is by far the best-positioned automaker to benefit from the “Inflation Reduction Act.”
- The stock price offers about a 100% potential upside from Morgan Stanley’s $330 price target.
Price Action: Tesla shares closed Tuesday’s session up 1% at $16, according to Benzinga Pro data.
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