Tesla Inc. is looking at another “volatile, idiosyncratic year” as it faces challenges in its core automotive business, with no high-volume new product in 2024 and increased competition for electric vehicles.
That’s from Morgan Stanley analyst Adam Jonas, a known Tesla bull. Jonas kept the equivalent of a buy rating on Tesla’s stock
TSLA,
which remains a top pick for him. He has a price target of $380, a 45% upside over Wednesday prices.
Jonas also revealed that he gets “pushback” from some investors who challenge one of his central arguments for being bullish on Tesla: that the company is a tech company and not simply a carmaker.
“It’s not terribly surprising that auto investors are cautious on Tesla” given the competition and a lack of high-volume new products for the year, he said in a note Wednesday.
Don’t miss: Tesla has ‘good mojo’ in China as the EV maker enters 2024
“In our discussions, many investors still debate the merits of Tesla as ‘more than an auto company,’” he wrote. “In our opinion, Tesla is definitely an auto company. It is also an [artificial-intelligence] company. Think ‘and’ not ‘or.’”
In the past year, Tesla’s share price disconnected “from the automotive
narrative,” Jonas said. Consensus per-share earnings expectations for 2024 have been slashed by nearly 50%, yet the stock has doubled.
“There seems to be something else driving the stock. Looking ahead to 2024, we expect another challenging year for the core auto business,” Jonas said.
Related: Here’s why Tesla is facing a ‘lower-growth period’ in the new year
“All else equal, continued negative surprises on the auto side should be negative for the stock. After all, Tesla is an auto company. But as we’ve learned with Tesla over our years of coverage, all else is rarely equal.”
Jonas stuck with his call that Tesla is more than a car company, with products such as the humanoid robot Optimus and the Dojo supercomputer to push it forward. There’s also a “halo effect” from SpaceX, the aerospace company led by Tesla Chief Executive Elon Musk, he said.
“In our opinion, Tesla is far more than an auto company,” Jonas said. “We receive significant pushback from our clients for including non-auto revenue streams in our valuation.”
Tesla debuted the Cybertruck earlier this year, but production of the highly specialized electric pickup truck is not expected to reach significant volume until 2025.
Tesla will also benefit from competitors pulling back on EV investments, Jonas said. That would cede “higher levels of market share to Tesla, particularly outside of China, in the years ahead.”
Tesla is expected to report fourth-quarter production and deliveries numbers, its proxy for sales, in the first week of January. The FactSet consensus calls for deliveries of 473,000 EVs, including 326,000 Model Ys, Tesla’s best-selling compact SUV.
The company is slated to report fourth-quarter earnings in late January, with the analysts surveyed by FactSet looking for adjusted earnings of 73 cents a share on sales of $25.6 billion in the quarter.
This year, Tesla shares have gained 113%, while the S&P 500 index
SPX
has advanced 24%.
