Electric-vehicle sales are reaching unprecedented levels in the United States and globally. However, while demand is soaring, other economic factors present significant challenges.
In a recent report, Adam Jonas, a Morgan Stanley analyst, reduced his price target for Tesla stock from $380 to $345, while maintaining a Buy rating. Jonas points out that the electric vehicle (EV) market is experiencing oversupply, which is causing global EV momentum to stagnate. He anticipates Tesla’s outlook for 2024 to be cautious in terms of volume and profitability.
Although this news may not be well received by investors, it is essential to note that Tesla will be releasing its fourth-quarter numbers on Wednesday evening. Analysts predict fourth-quarter earnings per share of 73 cents and $3.07 for the entire year, according to FactSet. Wall Street also expects Tesla’s earnings per share to reach $3.71 in 2024. On the other hand, Jonas estimates that in 2023, Tesla’s earnings per share will be $3.02 and has revised his 2024 projection to $1.98 from $2.41.
Despite the challenges faced by the EV industry, Jonas remains optimistic about Tesla’s AI and robotics optionality. This means that Tesla has considerable potential in its new businesses related to AI-trained cars and labor-saving robots.
In the fourth quarter alone, approximately 2.1 million battery-electric vehicles (BEVs) were sold in the U.S., Europe, and China. These numbers represent an all-time high. Moreover, BEV sales witnessed a remarkable 30% year-over-year growth, with a total of 6.7 million BEVs sold throughout 2023.
The road ahead for EVs may be challenging, but with Tesla’s promising ventures into AI and robotics, there is still significant potential for growth.
Tesla Faces Increased Competition in EV Market
Despite an impressive performance, the supply of electric vehicles (EVs) has also increased, thanks to the entrance of several new auto makers into the market. This surge in competition has led to price reductions, with Tesla taking the lead by slashing prices multiple times in 2023. Citigroup analyst Jeff Chung referred to this as a “price war” in China.
Following Jonas’ recent target-price cut, the average analyst target price for Tesla stock now stands at around $237, according to FactSet. Despite this adjustment, Tesla stock rose by 1% in premarket trading, reaching $214.30. Additionally, both the S&P 500 and Nasdaq Composite futures saw gains of 0.3% and 0.6% respectively.
While a price cut typically does not result in a stock spike, Tesla has faced a tumultuous start to the year. As of now, shares have dropped by approximately 15% in January alone, largely due to price cuts in China and Europe, which have negatively affected investor sentiment.
It is worth noting that Jonas upgraded Tesla shares to a Buy rating in September, setting a price target of $400 at that time. Currently, 42% of analysts covering Tesla stock maintain Buy ratings, while the average Buy-rating ratio for S&P 500 stocks stands at around 55%.