Is Tesla "sleeping well"? Goldman Sachs and Morgan Stanley still have some "concerns"

Tesla's third-quarter financial report shines, but Goldman Sachs and Morgan Stanley still have some "concerns."

On Wednesday, Eastern Time, Tesla released third-quarter financial results that exceeded market expectations: Tesla's revenue in the third quarter increased by nearly 8% year-on-year, still lower than expected, but the profit was surprising, with the gross margin increasing by 195 basis points to 19.8% year-on-year.

In addition, Tesla expects car deliveries to increase by 20%-30% by 2025, and anticipates that the safety performance of Full Self-Driving (FSD) will surpass human capabilities in the second quarter of 2025.

With the surprise in the financial report, Tesla's stock price soared. Before the U.S. stock market opened on Thursday, Tesla rose more than 12%. However, can this financial report dispel concerns about Tesla's long-term growth? Goldman Sachs and Morgan Stanley are still somewhat cautious.

On Wednesday, October 23, Goldman Sachs slightly raised Tesla's target price for the next 12 months from $230 to $250, maintaining a neutral rating. Analysts like Mark Delaney stated that this financial report is a gradual positive signal, but Goldman Sachs has doubts about whether Tesla can achieve its FSD performance and vehicle delivery growth targets in 2025, as well as the sustainability of its gross margin.

Morgan Stanley strategist Adam Jonas and others stated that this strong financial report may mark the "bottom" of profit expectations and sentiment in the automotive industry, but whether concerns about Tesla's growth have truly eased remains to be seen.

Goldman Sachs: Tesla's long-term growth prospects are good, but there are still constraints

Goldman Sachs believes that Tesla has good long-term growth prospects, benefiting from its leadership position in the electric vehicle field, the breadth and depth of its technological capabilities in artificial intelligence, software, and hardware, and its ability to benefit from a full range of solutions including charging and storage.

However, Goldman Sachs also sees some constraints:

1. It is expected that the growth of FSD will take longer than Tesla's current target time;

2. It is believed that the automotive fundamentals may remain volatile in the short term (price reductions/incentive reductions are a negative factor, and delivery volumes are expected to be slightly lower than Tesla's expectations for 2024/2025);

3. It is believed that the valuation is already in place. Overall, we are raising earnings per share (EPS) expectations, mainly due to higher gross margins and higher regulatory credit income.

Morgan Stanley: Have concerns about Tesla's growth really eased?

In a report titled "Strong Gross Margin/Free Cash Flow Exceed Expectations, Have Growth Concerns Eased?" Morgan Stanley raised a series of market concerns that are still unresolved:

What is the direction of Tesla's capital expenditure growth, how much does AI account for in capital expenditure, and what is the payback period?

Before launching "unregulated" Full Self-Driving technology in the 2025 fiscal year, what is Tesla's development path in autonomous driving, government certification, and insurance, or what is the next milestone?

Will Tesla's profit margin in the fourth quarter experience any abnormal situations, leading to unmet expectations?

The expected growth of Energy Storage Systems (ESS) in the fourth quarter exceeds 180%. What is driving this growth, and how much does the price per kilowatt-hour need to decrease to achieve this growth?