Ahead of Tesla, Inc.‘s TSLA fourth-quarter results on Wednesday, a fund manager raised questions about the price target of a bullish analyst.
What Happened: Morgan Stanley analyst Adam Jonas cut his estimates for Tesla, citing expectations for a challenging year for electric vehicles.
He reduced the 2024 adjusted earnings per share estimate from $2.41 to $1.98, down from the $3.02 per share estimated for 2023.
Morgan Stanley’s price target dropped from $380 to $345, with reductions attributed to lower volume, average transaction price, and margins in the core auto business, as well as lower valuation for Tesla Mobility and Network Services and a cut to the valuation of Tesla Insurance, Battery, and Energy businesses.
See Also: Everything You Need To Know About Tesla Stock
Gary Black’s Perspective: Future Fund co-founder Gary Black found Jonas’ note “weird” as the analyst lowered the 2024 adjusted earnings per share estimate below the consensus estimate of $3.82, despite having the second-highest price target among 50 analysts covering Tesla.
Black, who is bullish on Tesla and holds it as the third-highest holding in Future Fund Active ETF FFND, has his 2024 estimate at $3.75 per share.
Black sees Jonas’ estimate as implying 2024 deliveries of 1.8 million units and an auto gross margin of 10%, with the price target including only a $75 per share contribution from the core auto business.
“The MS sales team will have a hard time with this call: ‘How does your $TSLA analyst have the lowest FY'24 Adj EPS est but the 2nd highest PT on the Street?'” said Black.
Why It’s Important: Incidentally, Jonas gave Tesla a Street-high price target of $400 in September 2023, based on the company’s Dojo supercomputer potentially adding $500 billion to enterprise value. He later reduced it to $380 in late October following Tesla’s double miss in the third quarter.
Tesla is expected to report fourth-quarter adjusted earnings per share of 74 cents and revenue of $25.547 billion.
The stock, currently in a depressed trading range, will need a robust performance and outlook to break out of this range. Black sees the fourth-quarter core auto gross margin, commentary on the margin outlook, and 2024 deliveries as key metrics that can move the stock.
Tesla closed Monday’s session at $208.80, down 1.60%, according to Benzinga Pro data.
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