Institutional investors overwhelmingly expect Tesla, Inc. TSLA to underperform over the next year, according to Morgan Stanley analyst Adam Jonas. This negative outlook follows a “Tesla bull/bear” lunch hosted by the firm in New York and as the EV giant’s stock languishes at depressed levels.
The Dominant Consensus: “There was barely any attempt to argue for a near-term bull case,” Jonas said, summarizing the overall sentiment. Almost all investors expect the stock to underperform in the next six and twelve months, respectively.
“We acknowledge FY24 will be a challenging year for the global auto industry, which is reflected in our estimates,” he added.
The Shifting Narrative and Investor Concerns: Jonas suggests that Tesla CEO Elon Musk‘s shift in focus from “AI narrative” to “deteriorating EV demand narrative” has impacted investor sentiment. He believes positive developments in the EV market are essential for them to embrace the AI narrative.
Investors also worry about Tesla’s potential lack of year-over-year volume growth in 2024, Jonas said.
He added that they agree with Morgan Stanley’s below-consensus 2024 earnings per share estimate of $2.04 and anticipate additional downward revisions, putting further pressure on the stock.
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Mixed Consumer Perception: Morgan Stanley’s Consumer Pulse survey reveals a mixed consumer perception of the Tesla brand, with approximately one-third holding positive and negative views each.
Around 43% of respondents consider Musk’s reputation a significant factor in their overall brand perception.
Electric vehicle owners demonstrate the strongest brand affinity, followed by hybrid vehicle owners, Jonas noted. Interestingly, this group with higher brand perception relies more on Musk’s image for their assessment.
Analyst Maintains Bullish Bias: Despite the prevalent skepticism, Jonas maintains an Overweight rating on the stock. “TSLA offering over 80% upside from current levels, which we believe is compelling in proportion to the investment level without our US auto coverage,” he said.
Price Action: Tesla closed Wednesday up 2.5% at $188.71 and was 0.83% higher in after-hours trading, according to data from Benzinga Pro.
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