It is now 5% cheaper and comes just days after Tesla offered Chinese car buyers an incentive in the form of an insurance subsidy worth about $1,000 on purchases of Tesla's existing inventory of Model 3 and Y rear-wheel-drive vehicles in China made before the end of March.
In his report, Jonas cited price competition and oversupply in China as two reasons for Tesla to reduce its operating profit margin from about 17% in 2022 to about 9% in 2023
As of Wednesday's trading, Tesla shares are well off the 52-week high of $299.29 seen last summer. Trading volume of 119.66 million at Tuesday's close was 9.99 million above the 65-day average volume of 109.67 million.Tesla Stock Declines After Morgan Stanley Bull Cuts Estimates and Price Target
Tesla shares were set to rise in early pre-market trading on Wednesday, breaking a two-day sharp decline, as one of the biggest Tesla bulls lowered his price target on the stock.
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shares were up more than 1% in pre-market trading, while S&P 500 and Nasdaq Composite futures were up 0.4% and 0.8%, respectively. The rally came after a sharp two-day decline that sent shares down almost 11% to $180.74 from $202.64. But by midday, shares were down 2.3% to $176.56 and have lost almost 13% in the past three days, the worst three-day period since October 20, 2023, when shares fell 16.8%, according to Dow Jones Market Data.
Blame Morgan Stanley analyst Adam Jonas. He turned a key investor fear into reality by lowering his price target and forecasts.
"A challenging year for electric vehicles... demand continues to slow despite continued price cuts," Jonas wrote in a report Tuesday evening. Moreover, he characterizes Tesla's product lineup as "relatively old," the Chinese EV market as "oversupplied," and notes that hybrid vehicles pose more of a threat to EVs than previously thought.
As a result, it lowered its GAAP EPS estimate to less than $1 per share. GAAP stands for generally accepted accounting principles and includes things sometimes excluded by companies, such as share-based compensation. Wall Street's current consensus is $2.86 per share, according to FactSet.
