Tesla Gets a Rally From Morgan Stanley Upgrade and Optimistic Outlook of CEO
Tesla Motors (NASDAQ: TSLA), maker of electric vehicles and electric vehicle components, got a boost in early trading Monday following an upgrade at Morgan Stanley and some encouraging comments from its founder and Chief Executive Officer, Elon Musk.
Morgan Stanley released an encouraging report for Tesla investors Monday morning, upgrading the company's rating from Underweight to Overweight while increasing its price target from $45 to $50.
The upgrade was justified on the basis that delivery expectations for the highly anticipated Model-S have consistently fallen this year, to at or below what deliveries will actually be. Morgan Stanley went on to say that a 72 percent fall in EPS expectations this year also set the bar low for the cutting edge auto-maker.
In an interview with Liz Claman of Fox Business News, Musk was asked to comment on the large volume of shorts currently placed on his company's stock. He answered that “I think it's very unwise to be shorting Tesla. I think there's a tsunami of hurt coming for those holding a short position, and it's going to be very unpleasant. I advise people to exit while there is time.”
Musk and his company have faced other difficult questions from investors, many centering around why Tesla can succeed where the big three - General Motors (NYSE: GM), Ford (NYSE: F) and Chrysler (OTC: FIATY) have failed. When Fox's Claman posed this question to Musk in their interview, he responded confidently that his company “will never make a bad product”, saying that Tesla will not be focused on “cutting pennies”, but on developing compelling and innovative product offerings.
This product-centric focus, a common theme in silicon valley giants such as Google (NASDAQ: GOOG) and Facebook (NASDAQ: FB) is also a focus in Morgan Stanley's report, and a source of significant confidence. This high tech approach, and its application to a recently non-innovative industry is one of the reasons Tesla has caught investors' interest.
Tesla's first vehicle, the high-performance Tesla Roadster, sold 2500 units and was famous for having a demand that far exceeded the company's ability to deliver vehicles. Now, with its Model-S sedan, Tesla will be put to the test as it attempts to deliver a product that is not only up to the public's high standards, but at a quantity that gives the vehicle a significant presence.
The company's stock has been a rollercoaster ride throughout 2012, experiencing highs just under 40 dollars while at times falling down near 20 dollars per share. Regardless of how rocky the road has been however, shares of Tesla are up almost 25 percent for the year and seem to be continuing to rally.
Shares of Tesla traded up 5.69 percent Monday around $32.12.
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