2024 is off to a rough start for Tesla (NASDAQ:TSLA), with its stock declining by 29% year-to-date. Adding to the concerns, Morgan Stanley analyst Adam Jonas expects the year to be challenging for the electric vehicle (EV) giant due to declining margins and weak global demand. On March 6, Jonas trimmed TSLA’s price target to $320 from $345 per share but reiterated a Buy rating on the stock.
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Jonas highlighted that the ongoing moderation in EV demand, coupled with price reductions, may hurt the company’s profitability. He pointed out that fleet operators are offloading EVs, while hybrid models are gaining traction. Additionally, Jonas observed that Tesla’s products are relatively old compared to other major players, potentially impacting its competitive standing.
Notably, Tesla’s aggressive price cuts have negatively impacted its margins to a great extent. Its adjusted EBITDA margin fell by 637 basis points in 2023. Further, its operating margin decreased by 758 basis points. Jonas anticipates that Tesla will scale back its price reductions to safeguard margins and cash flow. Nonetheless, he foresees a decrease in the company’s automotive gross margin for 2024. Consequently, the analyst has decreased his adjusted EPS estimate from $2.04 to $1.51.
Is Tesla Stock a Buy, Sell, or Hold?
The analysts remain cautious on Tesla stock due to competitive headwinds, especially in China, softening EV demand, and declining margins.
It has a Hold consensus rating based on 11 Buy, 19 Hold, and five Sell recommendations. Analysts’ average price target of $210.78 implies 19.4% upside potential from current levels.
