Morgan Stanley Sees a 'Pretty Good' Qtr for Tesla (TSLA), Highlights 6 Items Underestimated by the Market

Morgan Stanley analyst Adam Jonas reiterated an Overweight rating and $900.00 price target on Tesla (NASDAQ: TSLA) ahead of third-quarter earnings. Jonas expects results to be "pretty good."

"They should be pretty good. I mean, you saw their deliveries beat by nearly 10pct while the rest of the industry is scrambling," Jonas commented. "How’d they do that? And what else could they be getting right along the way?"

The third quarter comments was an afterthought in this morning's note from Jonas, who instead focused on several key things being underestimated by the market:

1. Capital. "In an EV arms race, access to unlimited capital is king. Who has more access than Tesla...

2. Manufacturing. "While legacy OEMs seek to re-use existing assets and processes, Tesla can ‘experiment’ with audacious new techniques." He points to the ‘Gigapress' as an example

3. Scale. "Elon wants to take this further to casting the entire chassis of the car as a single piece in a 12,000 ton Gigapress. The scale to make such investments viable suggests Tesla may be thinking FAR above conventional auto making. Could we see the dawn of the 1 or 2 million unit plant this decade?"

4. Breadth. "Tesla essentially only sells 2 products today (3 and Y)... yet Tesla was one of the most profitable OEMs in the world ex ZEV credits. Over the next few years we expect to see a proliferation of Tesla segments to include compact, pickup truck, HD truck, people-mover/ride share, delivery van, a true Model X replacement, and much more."

5. Geography. "... we expect to see Tesla accelerate its geographic push into non-China international markets including India, the UK, E. Europe/Russia, and Australia/Asia

6. Services. EV could be lower margin than ICE car business, so services are needed. "We expect Tesla will make it even clearer over the next 13 months how it will use the network to improve the user experience while rewarding the company."

For an analyst ratings summary and ratings history on Tesla click here. For more ratings news on Tesla click here.

Shares of Tesla closed at $870.11 yesterday.

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