Close

Tesla's (TSLA) Bullish Thesis Grows Wings at Morgan Stanley

August 17, 2015 6:51 AM EDT
Get Alerts TSLA Hot Sheet
Price: $175.79 -2.25%

Rating Summary:
    23 Buy, 27 Hold, 13 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 0 | Down: 0 | New: 0
Join SI Premium – FREE

(Updated - August 17, 2015 12:01 PM EDT)

The world of human-driven, privately owned, internal-combustion vehicles is fundamentally changing, said Morgan Stanley analyst Adam Jonas, and he thinks Tesla (Nasdaq: TSLA) is among the companies best positioned to take advantage of the automotive industries’ biggest flaw – lack of utilization.

Jonas explained, “the shared mobility model, i.e., shared transport empowered by smart technology, is significantly enhanced by autonomous cars, enabling higher vehicle utilization. Higher utilization overcomes the poor payback economics of electric vehicles (EVs). Reinforcing this is our view that EVs should work better in an autonomous, shared model.”

The Morgan Stanley report notes that ten trillion vehicle miles are driven annually, and the question is which firms can capture the most miles and at what price.

"Firms with expertise in autonomous tech and networked machine learning can exploit the inefficiencies in the current model. TSLA may be uniquely positioned to dominate,” continued the analyst. “Tesla is introducing a suite of sensor and software capabilities in the Model X (due next month), which we believe could set a new industry standard for driver-replacement technologies that could eventually find their way into high-utilization shared mobility models.”

Jonas admits there are risks to his thesis and not every investor is will be onboard with ‘Tesla Mobility’. For those who disagree and would rather wait to give credit to Tesla for the shared mobility model, he thinks Tesla is a fairly valued stock worth $319. However, Morgan Stanley has enough confidence in the thesis to include it in its base case and raise its price target on the stock to a Street high $465, up from $280.

“We understand the assumptions in this note may seem radical to some investors accustomed to the slow pace of changes in a century-old auto business. However, we see these assumptions as plausible, though they are by no means certain. We are aware of dozens of business models trying to exploit the biggest flaw in the auto industry – 3.5% utilization. We believe that someone is going to figure it out at some point and get these miles, and we feel Tesla is best positioned to do so,” concluded Jonas.



Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In





Related Categories

Analyst Comments, Analyst EPS View, Analyst PT Change, Hot Comments, Momentum Movers, Trader Talk

Related Entities

Morgan Stanley, Tesla