Tesla's big name investors expect a decline in the stock price over the next six to 12 months, Morgan Stanley's Jonas says.

An informal survey of institutional investors in Tesla (TSLA) conducted by Morgan Stanley found that many of them are bearish and expect the stock to underperform over the next six months.

“I just returned from easily the most bearish and bearish Tesla lunch, but for understandable reasons,” Morgan Stanley analyst Adam Jonas wrote in a note on Wednesday. “Some doubt whether sales will grow at all this year. Most see the consensus as declining and that AI is ‘off the table’ for now.”

Jonas said his “read of the room” from the lunch, a semi-regular gathering that Morgan Stanley holds for its institutional clients, revealed that “everyone felt the stock would underperform over 6 months,” and nearly everyone felt the stock would underperform. During the next six months. Next year. Tesla stock is down a whopping 25% year to date.

Jonas pointed to several reasons behind the overall downward trend among customers, one of the biggest being artificial intelligence and Tesla's exclusion from the previous AI-related period in the technology space.

“[Tesla CEO] “Elon Musk is seen as 'sidelining' Tesla from the 2024 AI theme, allowing investors to focus on deteriorating demand for electric vehicles,” Jonas wrote.

This is likely the result of a series of tweets posted by Elon Musk in mid-January, in which he wrote that he would be “uncomfortable growing Tesla into a leader in AI and robotics without ~25% voting control.” Many saw this as a threat to Musk splitting his AI efforts into separate companies, thus depriving Tesla of the gains it had made in its AI efforts and also demanding further compensation from Musk in the form of stock grants from Tesla's board of directors.

Jonas has written glowingly in the past about Tesla's artificial intelligence and supercomputing prowess and has modeled Tesla's long-term growth using these factors. Jonas noted that Morgan Stanley's valuation for Tesla's core automotive business represents just 22% of the company's $345 price target, with other Tesla plays such as artificial intelligence, fleet and cloud network services, robotics, software (full self-driving) and supercomputing making up the rest. .

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However, despite the automaker's efforts in this area, such as using AI to train its full self-driving software, Jonas believes that AI sentiment is so bad at the company that Tesla is “not only excluded from the AI ​​business… The Other Side of Artificial Intelligence Trading.” Recent Performance of Shares of the “Magnificent Six”. Prove it.

Another big concern among investors was the possibility of little to no revenue growth — something that seems unheard of given Tesla's performance over the years.

“Investors wondered if there was a possibility that Tesla might not grow volume versus its Q4 run rate of 2 [million] “For a name whose management team has recently been targeting a 50% CAGR (compound annual growth rate),” Jonas wrote. [in annual deliveries]The change in sentiment on growth was not lost on the group.

In fact, while Tesla did 484,507 births reported In the fourth quarter, which marked an all-time record quarter for Tesla, management warned that “the vehicle volume growth rate may be significantly lower than the growth rate achieved in 2023.” Tesla mentioned Car deliveries in 2023 grow by 38% to 1.81 million, while production grew by 35% to 1.85 million.

Despite the overall tone during lunch, Jonas reiterated Morgan Stanley's overweight rating and $345 price target on the stock, which represents an 80% upside for shares from current levels. However, in order to achieve that kind of upside, Tesla will have to overcome issues facing not only electric vehicle makers but the larger auto sector as well, such as high interest rates, rising costs, and abundant supply.

“We recognize that FY24 will be a challenging year for the global auto industry, which is reflected in our estimates,” he said.

Pras Subramanian is a reporter for Yahoo Finance. You can follow it Twitter and on Instagram.

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