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- Morgan Stanley says Tesla stock could rise 50% despite vehicle price reductions
- Analyst Adam Jonas pointed out Tesla's strong balance sheets and profitability.
- He wrote that Tesla's recent price reductions are the latest sign that the EV market might be entering the "shake-out" phase.
Morgan Stanley estimates that Tesla stock could rise 50% if it has a strong balance sheet, and a head start against the competition in EV markets.
Analyst Adam Jonas named Tesla as his top pick in auto sector. He replaced FREYR Battery with Tesla.
He wrote that Tesla's recent price reductions are the latest sign that the EV market might be entering the "shake-out" phase.
Jonas stated that the EV market is moving from an era of over-supply to under-supply. This is characterized by shorter delivery times and price cuts as well as falling used car values.
Morgan Stanley reduced its 12-month price target of Tesla stock from $250 to $220, but it maintained an overweight rating. After the close, shares rose 0.8% to $145.
The note stated that Tesla still offers approximately 50% upside with a materially lower execution risk and dilution than peers.
Tesla shares have risen nearly 19% this year after suffering a severe rout in 2022, which saw the stock drop 65%.
Rivian, Lucid and Lucid are competitors that seem to have given way to Tesla in pricing strategy tactics. Elon Musk's recent price cut will make it clear that the wider landscape must follow his lead or risk losing market share.
The note stated that Tesla was the only EV brand to have made a profit and others (RIVN, LCID, LCID) had a BOM cost well above their average selling price. We don't believe everyone will be able cut prices without substantial capital raises.
Morgan Stanley has lowered its price target for Tesla stock but its $220 level is still the highest on Wall Street.
JPMorgan rates Tesla as "underweight" at $120, while Wedbush rates Tesla as "outperform" at $175.
Jonas stated that Tesla could leverage its industry-leading margins and manufacturing scale in order to grow the market and tax' the competition "in a world where EV prices are deflationary."
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By: bevans@insider.com (Brian Evans)
Title: Tesla stock could soar 50% and is the top pick in an auto sector that’s seeing an EV ‘shake-out,’ Morgan Stanley’s Adam Jonas says
Sourced From: markets.businessinsider.com/news/stocks/tesla-stock-outlook-elon-musk-price-target-220-ev-deflation-2023-1
Published Date: Wed, 25 Jan 2023 20:01:17 +0000
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