- Well-known Tesla bull Adam Jonas slashed his rating for the stock Thursday.
- Earnings will likely fall as the EV maker presses ahead with its price war, he wrote in a research note.
- Shares have jumped 115% year-to-date – and the Morgan Stanley analyst isn’t alone in advising investors to take some profits from that rally.
Top Tesla bull Adam Jonas has warned investors that the EV stock is likely to give up some of its gains after starting 2023 with a breathtaking rally.
The Morgan Stanley analyst slashed his rating for Elon Musk’s company from “overweight” to “equal weight” Thursday, and shared a $250 price target that would see the stock fall around 4% from its current price level.
Jonas’ caution comes after Tesla started 2023 with a breakneck surge, jumping 115% year-to-date – while the benchmark S&P 500 is up 14% over the same period.
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“I have to be up-front with you all,” he wrote in a research note seen by Insider. “While the team has defended the Tesla [overweight] rating all year, I did not see this rally coming.”
The analyst added that he’s expecting Tesla’s price war, which it has been pressing ahead with since late 2022 in a bid to revive faltering demand, to weigh on earnings and then drag on the company’s share price.
Early signs seem to suggest that’ll be the case – with profit margins falling 24% in the first quarter of 2023, according to an earnings report released on April 19.
“Despite the recent rally, we expect material negative revisions for Tesla consensus earnings forecasts and continue to expect a long-term trend of pricedowns at Tesla, driven by intensifying competition with Chinese EV players and a slowing auto consumer,” Jonas said.
Tesla shares fell around 8% the day after the first-quarter earnings report was published, but have since staged a huge comeback thanks to investors’ belief that CEO Musk has a renewed focus for the company after he appointed a new Twitter CEO.
Since he announced the hiring of Linda Yaccarino on May 12, Musk has embarked on a high-profile tour of China and signed deals that’ll let Ford and GM use his company’s sprawling supercharger network.
But Morgan Stanley isn’t the only bank to have slashed its Tesla rating this week.
Barclays analyst Dan Levy downgraded the stock from overweight to equal weight Wednesday, advising investors to take the opportunity to reap some profits from Tesla’s massive rally.
Read more: Tesla stock’s dazzling rally is thanks to CEO Elon Musk’s renewed focus on the EV maker, activist investor says
