Morgan Stanley Sees 4 Speedbumps in the Tesla (TSLA) Quarter but Overall Story is Little Changed

Morgan Stanley analyst Adam Jonas reiterated an Overweight rating and $900.00 price target on Tesla (NASDAQ: TSLA) highlighting 6 points from the quarter, 4 of which appear to be speed bumps:

• Clean auto gross margin of 22%, higher than the street forecast and even more impressive given deliveries were 99% Model 3/Y and gross was hit by approx. $200mm related to COGS from S and X changeover costs.
• OP was roughly half of expectation due to lower revenue mix, higher opex (including SBC) and product changeover costs more than offsetting 1-time gains (Bitcoin).
• FCF, while higher than consensus, was lower than the previous quarter and lower than forecast.
• Working capital was a bigger drain due to S/X changeover.
• Strongest order bookings ever, demand materially exceeds their capacity to produce.
• Inventory at 8 days supply suggests supply is the issue, not demand.

The analyst stated "Overall, our view on Tesla is unchanged by the 1Q result and outlook. We still view Tesla as a ‘must own’ in Auto 2.0. For investors constructing an EV portfolio, at least, we see the risk of not owning the shares as exposing investors to greater risk of underperformance than by actually owning the shares. Admittedly, the company's $830bn market cap embeds a host of strong expectations for long term growth in auto and battery manufacturing, transportation services, software and energy. However, we can confidently reiterate our OW rating on the name relative to the average stock under our coverage – even at a valuation of approximately 5x our 2025 revenue estimate."

For an analyst ratings summary and ratings history on Tesla click here. For more ratings news on Tesla click here.

Shares of Tesla closed at $720.78 yesterday.

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