Tesla Seeing $500B Eroded From Valuation In 2 Months Is Buy Opportunity: Analyst Sees 100% Upside

Zinger Key Points
  • Tesla is the only profitable pure-play EV maker in Morgan Stanley's coverage universe.
  • China will be a sore spot as the EV sales growth will likely decelerate from 70% in 2022 to 15% in 2023, the firm estimates.

Tesla Inc. TSLA shares are going through a lean patch and it has stirred anxiety among retail investors.

The Tesla Analyst: Morgan Stanley’s Adam Jonas has an Overweight rating and $330 price target for Tesla shares.

The Tesla Thesis: Tesla shares are approaching Morgan Stanley’s bear-case price target of $150, dragged by China price cuts, decelerating electric vehicle demand, and other market currents, including Elon Musk’s Twitter buy and the crypto sell-off, analyst Jonas said in a note.

From a near-term high of $313.80 on Sept. 21, the stock has pulled back to a two-year intra-day low of $166.19 on Tuesday, losing about $466 billion or roughly half a trillion in market cap. 

The extended weakness has pulled Tesla shares to a two-year low, back to levels where they were when the company was added to the S&P 500 Index, the analyst noted.

See Also: Exclusive: Tesla Analyst Says Investors Need To Brace For More Wide Swings, Any Buyback Unlikely To Help Near-Term

The stock currently trades at about 14 times of 2025 enterprise value/EBITDA and 26 times the P/E, he added.

Jonas said he estimates compounded annual growth rates through 2030 of 25% for volume and 23% for revenue, which is half the company’s target of 50%. For 2023, Morgan Stanley models 37% topline growth, stemming from sales of 1.8 million units, and about $15 billion in free cash flow.

The analyst noted that investor sentiment has turned “sharply negative” on the global EV market, especially for China-exposed names. He cited data from Morgan Stanley’s China auto analyst Tim Hsiao that showed China EV sales growth will likely decelerate from 70% in 2022 to 15% in 2023.

Jonas said he continues to recommend Tesla due to the following reasons:

  • Tesla’s the only name in Morgan Stanley’s coverage universe to generate a profit before incentives on EV sales.
  • It’s the only self-funding pure-play EV name.
  • It has secured the necessary supply of the battery metals and related upstream materials needed to produce EVs at a multi-million-unit scale.
  • In a slowing economic environment, the gap between Tesla and the competition will potentially widen.
  • Tesla is by far the best-positioned automaker to benefit from the “Inflation Reduction Act.”
  • The stock price offers about a 100% potential upside from Morgan Stanley’s $330 price target.

Price Action: Tesla shares closed Tuesday’s session up 1% at $16, according to Benzinga Pro data.

Read Next: How to Invest In Tesla (TSLA) Stock

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