Morgan Stanley Sees Tesla (TSLA) Extremely Volatile in 2018
Morgan Stanley reiterated an Equalweight rating and $379.00 price target on Tesla Motors (NASDAQ: Tesla).
Analyst Adam Jonas expects Tesla shares to be extremely volatile in 2018, divided into two stages: (1) The alleviation of production bottlenecks with strong cash inflow, and (2) mounting concerns over the sustainability of the competitive moat.
Jonas said Tesla’s stock may reach highs in the range of $400 or more over the next few months before facing some more serious headwinds later in the year that could take the stock significantly below current level, possibly to $200.
The firm's key thoughts:
1. It is our working assumption that Tesla’s battery module production bottlenecks may be resolved in weeks.
2. We believe that Tesla baked in flexibility to allow for a highly unpredictable production ramp
3. The motivation of the Tier 1 and Tier 2 supplier base to be involved with the Model 3 project is a relevant factor in de-risking the ramp.
4. The Model 3 working capital arrangement may be highly favorable to Tesla, at least in the short term, during the inflection of the ramp… substantially alleviating concerns over near term liquidity.
5. Following a hypothetical 1H18 pop in the share price, we could see scope for longer-term risks in the story to come to the fore.
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Shares of Tesla Motors closed at $308.74 yesterday.