Tesla Bull Cuts Price Target On EV Maker: Here's Why

Tesla, Inc. TSLA CEO Elon Musk sounded out a tough June quarter and this does not come as a surprise, given the economic uncertainty and the COVID lockdowns in China.

An analyst at Morgan Stanley tempered his expectation for the electric vehicle maker's stock.

The Tesla Analyst: Adam Jonas maintained an "overweight" rating on Tesla shares, but lowered the price target from $1,300 to $1,200.

The Tesla Thesis: Morgan Stanley marked to market its second-quarter forecast for Tesla, modeling a lower volume, Jonas said in a note. The analyst cut his second-quarter volume estimate from 316,000 units to 270,000 units. The full-year estimate was cut from 1.425 million to 1.390 million, he added.

Jonas, however, increased the revenue estimate for the year by nearly 1% due to higher prices. This would make up for the volume shortfall that is mostly concentrated in the second quarter, he said.

Related Link: What This Tesla Analyst Makes Out Of Elon Musk's Warning Of A 'Tough Quarter' 

The analyst also lowered his second-quarter auto gross margin estimate, excluding zero-emission vehicle credit, from 25.8% to 24.6%. The cash flow, the analyst said, is almost unchanged at $9.3 billion.

Most of the volume shortfall will be made up for by the second-half volume and higher pricing, Jonas said.

The downward price target adjustment, the analyst said, is based on an increase in the weighted average cost of capital from 8.5% to 9%.

"We'd buy weakness on a potentially weak 2Q print," Morgan Stanley said.

Tesla Price Action: Tesla closed Wednesday's session down 0.40% at $708.26, according to Benzinga Pro data.

 

Market News and Data brought to you by Benzinga APIs
Comments
Loading...
date
ticker
name
Price Target
Upside/Downside
Recommendation
Firm
Posted In: Analyst ColorNewsPrice TargetReiterationAnalyst RatingsAdam Jonaselectric vehiclesElon MuskEVsMorgan Stanley
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!