An informal Morgan Stanley poll of institutional investors in Tesla (TSLA) found that many are bearish and expect the stock to underperform over the next six months. .
“We just came back from what was easily the most bearish lunch of the Tesla bull and bear markets, and for obvious reasons,” Morgan Stanley analyst Adam Jonas said in a note Wednesday. I wrote. “Some questioned whether sales would really grow this year. At this point, the majority believe the consensus has broken down and AI will be “off the table.” ”
Jonas said he “read the room” during Morgan Stanley's semi-regular lunch meeting for institutional investors and found that “everyone feels that stocks are going to underperform for six months.” Almost all respondents said they believed stocks would underperform over the next six months. next year. Tesla stock is down a whopping 25% since the beginning of the year.
Jonas cited several reasons why customers are generally bearish, but one of the biggest is that AI and Tesla have been left out of the tech industry's AI-related breakthroughs.
“[Tesla CEO] “Elon Musk is expected to 'sideline' Tesla from his 2024 AI theme, allowing investors to focus on the deteriorating EV demand story,” Jonas wrote.
This is likely a result of a series of tweets made by Elon Musk in mid-January, in which he said, “Grow Tesla into a leader in AI and robotics without up to 25% voting power.'' It's disgusting,” he wrote. Many see this as Musk's threat to strip Tesla of profits from its AI efforts by splitting them into a separate company, and Musk's threat to split the AI effort into a separate company in the form of stock grants to Tesla's board of directors. It appeared that he was demanding more compensation.
Jonas has written passionately about Tesla's AI and supercomputing capabilities in the past and used these elements to model Tesla's long-term growth. Jonas said that Morgan Stanley's valuation of Tesla's core automotive business is only 22% of the company's $345 price target, with AI, vehicle network services, cloud, robotics, software (full self-driving), supercomputing He pointed out that Tesla's other businesses, such as marketing, account for the remainder. .
Nevertheless, despite the automaker's efforts in this area, such as using AI to train its fully self-driving software, Tesla has a very poor reputation for AI within the company, with Tesla “It's not just being 'excluded' from, it's actually being excluded,” Jonas believes. This is the other side of AI trade. ” The recent performance of “Magnificent Six” stocks is proof of that.
Another big concern for investors was the possibility of little or no revenue growth. This was unprecedented considering Tesla's performance over the years.
“Investors were wondering if Tesla might not increase production compared to its fourth quarter capacity utilization rate of 2. [million] “The company's management recently targeted a top-line CAGR of 50%,” Jonas wrote. [in annual deliveries], changes in feelings about growth were not lost within the group. ”
In fact, Tesla reported 484,507 vehicle deliveries in the fourth quarter, Tesla's best quarter ever, but management said, “The rate of vehicle growth is faster than the rate of growth achieved in 2023. “It could be extremely low,” he warned. Tesla reported a 38% increase in vehicle deliveries to 1.81 million vehicles in 2023, and a 35% increase in production to 1.85 million vehicles.
Despite the general tone at lunch, Jonas reiterated Morgan Stanley's overweight rating and price target of $345, implying an 80% upside for the stock from current levels. But to deliver those gains, Tesla will need to overcome problems facing not only EV makers but also the larger auto sector, including rising interest rates, high costs and oversupply.
“We recognize that FY24 will be a challenging year for the global auto industry, and that is reflected in our forecasts,” he said.
Pras Subramanian is a reporter for Yahoo Finance.you can follow him twitter And even more Instagram.
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