Electric vehicle (EV) sales are reaching unprecedented levels both in the U.S. and globally, yet the surge in demand is only one side of the economic equation.
On Monday, Morgan Stanley analyst Adam Jonas revised down his Tesla share price target from $380 to $345 while maintaining a Buy rating, citing an oversupplied EV market.
“Global EV momentum is stalling,” wrote Jonas. “We anticipate Tesla’s 2024 outlook to be cautious on volume and profitability.”
The revision may be unwelcome news for investors ahead of the Q4 2023 Tesla earnings report on Wednesday evening. Wall Street anticipates fourth-quarter earnings per share of 73 cents and $3.07 for the entire year, with expectations for 2024 projecting earnings per share at $3.71.
Jonas, however, sees 2023 earnings per share at $3.02 and has adjusted his 2024 estimate downward from $2.41 to $1.98.
“Tough sledding for EVs but we remain [Buy-rated] on AI and robotics optionality,” added the analyst in his report. The concept of optionality suggests that Tesla possesses significant potential through its new ventures linked to AI-trained cars and labor-saving robots.
The fourth quarter saw a remarkable 2.1 million battery EVs (BEVs) sold in the U.S., Europe, and China, setting a record. The full-year figures for 2023 reached a staggering 6.7 million BEV sales, marking another record.
Despite 30% year-over-year growth in BEV sales, an increase in supply, with multiple automakers vying for EV market share, has led to heightened competition and showed up in price reductions. Tesla implemented several price cuts in 2023, with Citigroup analyst Jeff Chung characterizing the situation in China as a price war.
Following Jonas' reduction in the target price, the average analyst target for Tesla stock now stands at approximately $237, according to FactSet.
In premarket trading o Tuesday, Tesla stock saw close to a 1% increase, trading around the $210.81 mark. The benchmark S&P 500 index and Nasdaq Composite saw gains of 0.22% and 0.32%, respectively.
The apparent paradox of a stock rise following a price cut reflects Tesla's tumultuous start to the year, with shares having declined by approximately 16% in January. Investor sentiment has been impacted by price cuts in both China and Europe.
Jonas notably upgraded Tesla shares to Buy in September, setting a price target of $400 at that time. Currently, 42% of analysts covering Tesla stock maintain Buy ratings, compared to the S&P 500's average Buy-rating ratio of about 55%.
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