Tesla’s (TSLA) first-half results could come in below expectations on profitability amid a challenging year for electric vehicles, Morgan Stanley said in a report.
“If there was ever a time for Tesla to potentially post a GAAP EBIT loss in the auto business, it may be this year,” Morgan Stanley said, pointing to decelerating EV demand in key markets and an over-supplied China EV market.
Morgan Stanley expects Tesla to pull back on price cuts to defend its margins and cash flow in response to falling profitability.
“However, we still forecast Tesla FY24 FCF of <$100mm for the year,” the report said. For FY2024, Morgan Stanley cut its GAAP EPS forecast for the company to $0.99 from $1.54 previously.
Morgan Stanley reiterated its overweight rating on Tesla while lowering its price target to $320 from $345 amid the “seemingly overwhelming bearish institutional investor sentiment.”
“Tesla has significant attributes to be valued as an AI beneficiary, but the company must see a stabilization in the negative earnings revisions within the auto business first,” the report said.