A bull of Tesla Inc. felt a little less optimistic on Monday, as he assessed the electric vehicle company’s outlook.
Tesla’s
TSLA,
latest income surprised Morgan Stanley’s Adam Jonas, who said the company’s Wednesday afternoon report was “stronger and higher quality” than expected. While Jonas predicted that the company would not reach a consensus view amid potential input cost inflation and other issues, “this has not happened” and Tesla management continued to make “fairly optimistic outlook” for Q4 and beyond.
That said, Jonas still wants to bake with caution. He slashed his Tesla stock price target to $330 from $350 on Monday, though he reiterated a better rating on the stock.
The change comes as Jonas seeks to “make room for unexpected headwinds” in the current economic climate.
“We wanted to, for example, allow for a larger margin of safety on the supply chain side, as well as increased pressures from foreign exchange headwinds, input cost inflation, start-up costs and to some degree the destruction of demand”.
Jonas added that while many of his clients “don’t believe Tesla is vulnerable to a consumer slowdown due to the company’s unique position” in the electric vehicle market as well as “general supply shortages.” , he “fundamentally” disagrees. In his view, Tesla’s “increasing scale” is one factor that makes the company “vulnerable to profound changes in consumer power and affordability.” tram”.
He also answered Tesla’s Recent discounts in Chinawhich he said could “affect an already weak market sentiment.”
He continued: “We estimate Tesla generates about half of its profits from the Chinese market, making the stock a derivative of Chinese tech stocks. Tesla is expected to gradually become less dependent on China as he looks to 2030, but the business restructuring “takes time”.
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Tesla CEO Elon Musk tease redemption on Tesla’s last earnings call, but Jonas wasn’t sure it would be the right move.
“In particular, for Tesla, we are not very keen on share buybacks due to other growth opportunities we believe the company has available and the importance of accumulating cash reserves to maintain maintain self-financed status in a range of uncertain economic environments,” he wrote.
However, Jonas remains bullish on Tesla, noting that he considers the name a “core stock”. His overweight stance reflects the possibility that Tesla can “capitalize its cost leadership in electric vehicles to drastically expand its user base and over time generate [percentage] revenue from software and services periodically / has a high profit margin. “
