Morgan Stanley Analyst Explains Tesla's Price Target Cut

Adam Jones, analysts at Morgan Stanley (NYSE: MS), released a cautious note to investors Wednesday, January 21, in which he reduced the price target on Tesla Motors Inc (NASDAQ: TSLA) to $280. However, he reiterated his firm’s Overweight rating on the stock. Jones was on CNBC recently to explain the reasons for the price target cut.

Is There Support At $280?

“A few months ago, we were kind of concerned that the stock was running a bit too high for the wrong reasons,” Jones said.

“I mean, we fundamentally think there’s a fair value support at the $280 level, but we felt some of the arguments that investors and analysts were making (as this is going to be a democratizing model event to kind of bringing these to the masses), we think were really out of balance. Now here at $190 or $200? A much better level of balance in the debate.”

Is Tesla Special?

He continued, “If Tesla was just a story of putting electric motors in ugly cars, they’ll be in serious troubles. Thankfully, they are not.”

“They are on multiple levels disrupting a $10 trillion mobility market and we think that’s a classic opportunity to buy a great company doing much, much more than just electric propulsion.”

How Do Oil Prices Impact Someone Like Tesla?

“It affects the terminal value and the forward years outlook at the company,” Jones replied. “So, if they only define themselves as a maker of $100,000 cars, then clearly oil prices [are] not going to be a relevant factor.”

“But at a $30 billion valuation, there are many assumptions that they’ll become more of a mass market or mass affluent manufacturer and at that level, especially at $35,000 price point, you are making more economic payback arguments.”