Tesla (TSLA) Hit as Morgan Stanley Cuts to Underweight; EV Expectations Diminishing

December 8, 2011 12:52 PM EST
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Morgan Stanley is doing more slamming than Onyx on Thursday, this time aiming at Tesla Motors, Inc. (Nasdaq: TSLA).

Tesla is getting hit pretty hard Thursday, down about 10.4 percent on the session, as Morgan Stanley analyst Adam Jonas cut his rating from Overweight to an Underweight, slicing his price target from $70 to $44.

Jonas said that shareholders are long a near-dated call option on the Model S, and also a longer-dated call for mass adoption of EV. He said the former has done some nice appreciation, while the latter is heading for worthless expiration.

On the Model S, Jonas is more positive. He says, "Our change of view does not reflect a degradation of near term fundamentals or strategy, but merely recognizes rising investor expectations ahead of the Model S start-of-production (mid 2012). In short, our thesis of Tesla reacting to positive Model S catalysts is playing out. We expect the Model S to launch on time in July, but to ramp up slower than consensus expectations as the company prioritizes delivery quality over quantity."

But, for overall EV penetration, things aren't looking so great. From a previous expectation of 8.6 percent by 2025 (!), that number has been cut to just 4.5 percent. The adjustment reflects the weak European economy, disappointing sales volume, and the continued commercialization of advanced internal combustion technology.

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