Morgan Stanley Lowers Tesla Price Target, Predicts Lower Q2 Volumes

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by Tyler Durden
Thursday, Jun 23, 2022 - 06:07 PM

Morgan Stanley is staying skeptical on Tesla's forthcoming Q2 results.  

The firm cut its price target this week to $1,200 per share, from $1,300 per share, as analyst Adam Jonas also cut his Q2 volume and auto gross margin estimates. Despite the cuts, the firm has kept its overweight rating on the company. 

“We mark to market our 2Q forecasts for lower volume (latest data, China) with most of the shortfall made up for in 2H volume and higher pricing,” Jonas wrote this week. He also raised his full year revenue estimates slightly as a result of higher prices for autos, according to a mid-week Bloomberg wrap up of his note. 

Despite the cuts, Jonas is still encouraging "buying the dip" into what will likely be a weak Q2 print. He said that “with TSLA 2Q sales estimated to be around 100k units through May (, we believe TSLA will flex its manufacturing prowess, aided by accelerated ramp of Austin and Berlin, and deliver ~170-175k units in June.”

Recall, about a month ago both Morgan Stanley and Wedbush had soured on Tesla's prospects for its Q2. Back in May, we wrote about Wedbush's Dan Ives, who said Tesla's hangups in China would be an "epic disaster" for Tesla's upcoming quarter. 

Shortly thereafter Morgan Stanley joined the discussion, noting that Tesla's second quarter could wind up being a "substantial miss", as a result of Covid, supply disruptions and costs associated with ramping up the company's Berlin and Austin factories. 

Jonas said back in May that "Tesla was due for a reset". "Historically investors tend to sell low and buy high on this one," Jonas wrote, before stating that he thought Q1 would be the company's strongest quarter of the year. 

He raised the issue of margins and costs for the rest of 2022, saying Tesla needs to "confront" the supply chain disruptions currently taking place. 

"We believe Tesla's more 'gritty' capabilities in terms of manufacturing, material sourcing, supply chain, and infrastructure will drive the next leg of growth to the story," Jonas wrote.

He concluded: "Investors have long struggled to find a ‘good’ time to buy Tesla shares. We believe the China supply wobble that could potentially drive a substantial 2Q delivery miss provides a window of opportunity before potentially seeing 100%-type sequential recovery in Tesla China production later in the year."

Recall, hours ago Dan Ives called the situation in China "an epic disaster" for Tesla's coming June quarter and said he expects to see "modest delivery softness".

Ives also said he is expecting a "slower growth trajectory" in China into the second half of the year and called the headwinds out of Asia "hard to ignore".