Tesla Target Cut as Morgan Stanley Sees ‘Air Pocket in Demand’

(Bloomberg) -- Tesla fell 1.7 percent pre-market Tuesday, after Morgan Stanley forecast “an air pocket in demand that is coming earlier than we expected,” and cut its price target on the electric-vehicle maker to $260 from $283.

“For what many investors believe to be a high growth tech firm, TSLA has made notable moves to cut costs/prices & stimulate orders,” the firm wrote, referring to Tesla’s recent decision to cut prices and shutter stores.

Tesla appears poised to snap a three-day advance, and shares have lost more than 20 percent of their value from a December peak, as of Monday’s close.

“We expect the share price to remain in a volatile range with modest downside to our assessment of fair value,” analyst Adam Jonas wrote to clients, describing the stock as “fundamentally overvalued while potentially strategically undervalued.”

Morgan Stanley also cut its first-quarter delivery view by 23 percent “to allow for sluggish U.S. sales and potential impediments to international deliveries.” The firm wrote that investors should “keep medium/long-term expectations for Tesla’s ability to run a profitable Chinese business very low, due to a variety of technological and legal/regulatory factors.”

To contact the reporter on this story: Ryan Vlastelica in New York at rvlastelica1@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Scott Schnipper

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