According to Morgan Stanley, Tesla has enough money and liquidity to deal with short-term economic disruptions from the coronavirus, and continues to have a strong long-term thesis.
Analysts led by Adam Jonas, in a note, upgraded Tesla from Underweight to Equal-Weight, while lowering the target from $480 to $460.
"The impact of the COVID-19 sell-off has, in our opinion, brought the stock to a more attractive level, where we believe Tesla's share price and valuation today adequately reflects the value of the business," Jonas wrote.
Jonas noted that Morgan Stanley adjusted some estimates, in particular, dropping supply expectations due to an outbreak of coronavirus. The Tesla factory in Fremont is forced to stop working at full capacity, while 1/4 of the employees will continue to visit the factory. Jonas updated fiscal supply forecasts for 2020 to include one month of lost production at the Fremont plant in California, dropping it to 420,000 from 450,000 previous ones.
Adam Jonas, Analyst, Morgan Stanley. Photo: autonews.com
"We would expect Tesla to shut the Fremont plant temporarily, in line with most global automakers," Jonas wrote.
The analyst stressed that they are confident that Tesla has sufficient liquidity and access to capital during this time.
"We believe Tesla has sufficient liquidity and access to capital during this time," Jonas wrote. "The stock now trades below our revised $ 460 target and a more balanced risk-reward drives the move to Equal-weight."
The stock is now trading below Morgan Stanley's $460 price target.
"Ultimately, we believe we are at a point where, while economic uncertainty leaves the stock in a volatile position, we believe the stock is in a place where investors can potentially begin to add exposure," Jonas writes.
Just like other companies around the world, Tesla is experiencing a significant decline in the price of its shares. Despite this, the automaker has enough money and liquidity to deal with the temporary crisis due to the outbreak of the coronavirus.
Featured image: Tesla
Information in the article is provided for informational purposes only. I do not own shares of the company and do not intend to buy them within 72 hours.