Market Overview

Morgan Stanley Raises Tesla's Stock Bull Case On China, Cybertruck Opportunities

Morgan Stanley Raises Tesla's Stock Bull Case On China, Cybertruck Opportunities

Tesla Inc (NASDAQ: TSLA) skeptics are beginning to envision a path forward for the disruptive automaker. Morgan Stanley raised its bull-case price target, asserting that Tesla is “fundamentally overvalued, but strategically undervalued.”

The Rating

Analysts Adam Jonas and Armintas Sinkevicius maintained an Equal-Weight rating on the stock with a $225 price target.

The Thesis

Jonas and Sinkevicius raised their bull-case value to $500 to reflect Tesla’s product and geographic developments.

The company’s best-case scenario, according to Morgan Stanley, sees 100,000 Cybertruck sales at an average $50,000 by 2024. With 20% margins in earnings before interest, tax, depreciation and amortization, Cybertruck could contribute $20 in stock value.

Notably, the analysts don't include Cybertruck prospects in their current model, “given the high degree of risk associated with the product's success, such as the truck's rather polarizing design.”

Another potential source of value is the China market. If all things fall in Tesla’s favor, the company could pull 450,000 unit sales by 2025 to contribute another $40 to the stock price.

“We believe that our long-term base case China forecasts are rather conservative with Tesla sales in the region peaking at approximately 250k units by 2024/2025,” Jonas and Sinkevicius wrote.

Again, this is the best-case scenario for Tesla. Morgan Stanley’s bear case assumes a $10 stock price, and the base case assumes a $250 price.

“To be clear, we are not bullish on Tesla longer term, especially as, over time, we believe Tesla could be perceived by the market more and more like a traditional auto OEM; we are prepared for a potential surge in sentiment through 1H20 but question the sustainability,” Jonas and Sinkevicius wrote.

Price Action

At time of publication, Tesla's stock traded up 1.6% to $335.56 per share.

Related Links:

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Latest Ratings for TSLA

Mar 2020Piper SandlerMaintainsOverweight
Mar 2020Morgan StanleyMaintainsEqual-Weight
Mar 2020Argus ResearchDowngradesBuyHold

View More Analyst Ratings for TSLA
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