Featured Image Credit: (Background) Yahoo Finance, (Cars) Tesla
More Tesla investors perceive TSLA as a tech firm rather than simply an automaker, and Morgan Stanley warns that it's making the company grossly overvalued at more than US$1,000 per share. Morgan Stanely analyst Adam Jonas stated that it's hard to justify Tesla's high stock price.
According to Forbes, Jonas set a price target of US$650 for TSLA with an "underweight" rating. He explained that if investors are looking at TSLA as a tech stock, they may be ignoring some of the risks and problems it faces as a car company.
"[Tesla] still faces a multitude of risks associated with running a car company that the market seems to be ignoring," said Jonas. He estimated that Tesla would produce 2 million cars annually for the next ten years, and his forecast did not justify TSLA's high stock price. "At $1,000 we believe the stock is discounting roughly 4 million units" by 2030.
For some perspective, Tesla reported in its Q1 2020 Update Letter that the Fremont Factory's production capacity for the Model S and Model X was 90,000 units. It had a production capacity of 400,000—with the intention of reaching 500,000 in 2020—for the Model 3 and Model Y.
In Giga Shanghai, Tesla reported a production capacity of 200,000 for the MIC Model 3 SR+. The production capacity for the MIC Model 3 Long Range RWD, Performance, and Long Range AWD were not included in the company's estimates. Tesla China's Global VP estimated that Giga Shanghai would reach a production rate of 4,000 vehicles per week by the end of this month.
Also not included in Tesla's production capacity was the Model Y in Shanghai, as well as the Model 3 and Model Y from Giga Berlin. Tesla has set a goal to reach a 500,000 per year production rate for Giga Berlin, which is expected to start operations with the Model Y. The Fremont Factory's production capacity for the Tesla Semi, Roadster 2.0, and Cybertruck were not accounted for in the Update Letter as well.
Jonas said that if Tesla were compared to big tech companies like Apple or Microsoft, "one would have to consider (or ignore) significant inherent differences in Tesla's business model and capital intensity. One must also take into account many of Tesla's business objectives face a degree of execution risk that may be significantly higher than many of the more proven/mature companies in this analysis."
From a TSLA bull perspective, Tesla's software development sector—i.e., Autopilot, Full Self-Driving (FSD), and in-app purchases— and energy department are often ignored. However, the company is steadily gaining ground on both.
Since the beginning of the year, Tesla's OTA software updates have been steadily improving Autopilot and even FSD. The potential earnings Tesla could make from Autopilot and FSD have yet to be discussed but could impact the company in the next ten years.
Then there is Tesla Energy, which has also been making headways this year. Recently, Tesla was granted two electricity generation licenses, one in the UK and one in Australia. It also applied for a similar license in China.
These, together with the company's software prowess as indicated by its Autopilot, Full Self-Driving, and Autobidder solutions, could ultimately herald the expansion of Tesla's business into something far more than a regular automaker.
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This article is for informational purposes only. You should not construe any such information or other material as an investment, financial, or other advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, or offer by Ma. Claribelle Deveza, Tesmanian, or any third party service provider to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.
Ma. Claribelle Deveza holds zero share of Tesla, Inc., and currently (at the time of this article's publishing) holds zero options or securities in Tesla Inc. and/or its affiliates.