Tesla (TSLA) is Undervalued and Defensible, Morgan Stanley Explains

April 14, 2022 7:29 AM EDT
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Price: $182.78 -0.08%

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    30 Buy, 19 Hold, 9 Sell

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Morgan Stanley analyst Adam Jonas reiterated an Overweight rating and $1,300.00 price target on Tesla (NASDAQ: TSLA) explaining why Tesla shares are undervalued and cannot be compared to traditional auto companies on the belief that the company will play a critical role in rearchitecting the renewable energy/transport industry while its traditional auto business has a natural advantage over existing competitors.

1) Direct to Consumer Advantage: Tesla has an ongoing advantage of being able to go direct to consumer while legacy OEMs are prohibited from doing so by powerful state dealer franchise laws. This Tesla ‘loophole’ which new EV startups can also take advantage of is creating 2 classes of auto companies.

2) Multi trillion-$ battery capex cycle: War + inflation = energy innovation and the next 6 months can materially shift the narrative around what Tesla does. We estimate as much as $20 to $40tn must be spent over the next 20 years in accumulated capex and R&D to transition off of fossil fuels, and that 1% of this amount has been spent while less than 3% has even been allocated.

The analyst stated "We see Tesla as the ultimate battery capex play." He went on to size the opportunity noting "we estimate the order of magnitude of battery capacity required to move 100% of the global light vehicle fleet to electric + gridlevel/distributed stationary storage may be in the 20 to 40 TWh range, depending on a host of policies, technologies and other factors. At a capacity cost of roughly $80mm per GWh of capacity, the capex required for battery manufacturing alone could be in the $1.5 to $3tn range. That's just the battery factories. Add in the upstream mining/refining, downstream grid upgrades, renewable energy supply, charging infrastructure and related automobile manufacturing plants, recycling, service and support and we're talking figures potentially on the order of $10 trillion to $20 trillion or more over a 20 year period."

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 $1022.37 yesterday.

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