Morgan Stanley reiterated Tesla’s target price of $250. Tesla’s share price surpassed the $420-a-share privatization that CEO Elon Musk mentioned last year, in a fourth-quarter surge. After Tesla’s share price broke through $420, Musk quipped on social media, “Wow… The stock price is really high.
In August last year, Mr Musk’s suggestion on social media that he would privatise the company at $420 a share was “funded” and led to a lawsuit by the Securities and Exchange Commission for misleading investors.
Over the next 16 months, Tesla’s share price fell to a three-year low of just under $177 a share in June, then recovered and broke through $420 on Monday.
In a report released Monday, Morgan Stanley analyst Adam Jonas said Tesla’s current share price is too high for a automaker.
Investors will eventually no longer see Tesla as a technology company, the analyst said, leading to a plunge in its share price to levels comparable to that of other companies in the auto industry.
Morgan Stanley gave Tesla’s shares a neutral rating. Jonas’s target price of $250 means Tesla’s market value has fallen by 40 percent to about $45 billion from $75 billion on Monday.
“We’re not optimistic about Tesla’s long-term prospects, especially as time goes on, and we think Tesla will become more and more like traditional automakers,” Jonas said. “We are ready for a brief surge in popularity, but doubts about its sustainability. “
Tesla’s share stake last broke through the $250 mark in October, shortly after the company reported better-than-expected third-quarter earnings and unexpected profits, sending its shares up more than 20 percent in after-hours trading. The stock has risen more than 60 per cent since the fourth quarter of this year.
Tesla’s strong performance this quarter was largely due to the advance of its Shanghai super plant, the company’s first production center outside the U.S.
As Demand for Tesla cars increases in China, Musk praised the plant and the Chinese market as key to the company’s future. Not to mention that it could significantly reduce Tesla’s production costs.
In November, Musk also announced plans to build a fourth superfactory plant in Berlin. Tesla’s sales in Europe grew in the first three quarters of 2019, despite an overall slowdown in the new car market.
Musk also told shareholders on the company’s third-quarter earnings conference call that Tesla has launched the long-awaited Model Y crossover ahead of schedule, which is expected to be launched next summer.
Mr Jonas said its share price could continue to rise as the company made landmark progress on these projects, but in the long run it would prove overvaluefor a carmaker.
“We believe that 2020 will provide a strong path to events for the Unit. There are many catalysts in the coming year, whether it’s milestones in China, Model Y, or the announcement of new technologies, that will make it possible for Tesla to test the limits of our widely recognized bull-bear boundaries,” Jonas said. “We still think Tesla is fundamentally overrated, but strategically undervalued. “
Although Jonas set Tesla’s target price of $250 a share, earlier this month the analyst raised his “optimistic forecast” for Tesla shares to $500 a share, compared with a “pessimistic forecast” of $10.