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On Thursday, Morgan Stanley (NYSE:MS) analyst Adam Jonas adjusted Tesla’s (NASDAQ:TSLA) price target from $430.00 to $410.00, while reaffirming an Overweight rating on the stock. Currently trading at $236.06 with a market capitalization of $755.5 billion, Tesla maintains a notably high P/E ratio of 104.8. Jonas noted that despite year-to-date auto deliveries falling short of expectations, this has not significantly altered the firm’s investment thesis for Tesla. The revision reflects lowered projections for Tesla’s auto deliveries in both the first quarter and the full year, citing increased competition, an aging product lineup, and negative brand sentiment leading to a potential buyers’ strike. According to InvestingPro, 9 analysts have recently revised their earnings estimates downward for the upcoming period.
Jonas indicated that investor sentiment has shifted, with some now anticipating a year-over-year decline in deliveries exceeding 10%, a stark contrast to the more bullish outlook from January. This sentiment shift aligns with Tesla’s challenging year-to-date performance, showing a -41.6% return according to InvestingPro data. This change has influenced the reduced contribution of Tesla’s Core Auto segment to the new price target, which now accounts for less than 20% of the $410 valuation. Furthermore, the Network Services valuation, which is predicated on the size of the Tesla car park for attaching high-margin recurring services, has also been decreased to $161 of the $410 price target.
Sales data for Tesla in January showed significant year-over-year decreases across multiple regions: a 45% drop in Europe, a 15% decline in China retail sales, and a 16% fall in the United States, according to various sources including Bloomberg and Motor Intelligence. February continued the trend with declines, including a 23% decrease in US Model Y sales and even steeper drops in Europe, particularly in France and Germany. However, recent reports from Greater China Autos analyst Tim Hsiao have indicated some recovery in China, with weekly sequential sales increases in March.
Based on these market dynamics, Morgan Stanley has revised its first-quarter delivery estimate for Tesla to 351,000 vehicles, a 9.3% decrease year-over-year, compared to the previous estimate of 415,000 vehicles, which would have represented a 7.3% increase. The firm also adjusted its full-year delivery forecast for 2025 to 1.615 million vehicles, down 9.8% year-over-year, and for 2030 to 4.7 million, down from the prior estimate of 5.2 million. These adjustments reflect the evolving landscape of the electric vehicle market and the challenges facing Tesla, including its relatively low gross profit margin of 17.86%. For deeper insights into Tesla’s financial health metrics and comprehensive analysis, including 16 additional ProTips, access the full Tesla Research Report on InvestingPro.
In other recent news, Tesla is preparing to introduce a cost-reducing innovation in its Cybertruck batteries. The company plans to implement dry cathodes, which could potentially save Tesla over $1 billion annually, depending on production volume. This development is part of Tesla’s ongoing effort to reduce battery production costs and enhance manufacturing capabilities. Meanwhile, at Tesla’s German plant, approximately 3,000 workers have signed a union petition demanding longer breaks and more staff, highlighting ongoing tensions between the company and labor unions. In response, Tesla plans to share results from an internal survey showing that 80% of surveyed employees reported job satisfaction. Additionally, Tesla is converting 300 temporary jobs into permanent positions to manage increased production of the Model Y in Berlin. In another development, Tesla is facing a recall of all Cybertrucks produced and sold in the U.S. during the first 15 months due to a defect involving loose trim pieces. Lastly, Elon Musk has initiated legal proceedings against the Indian government over content regulation on X, a social networking service owned by Musk, challenging the government’s interpretation of the IT Act.
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