Monday, May 15, 2017

A major Tesla bull just downgraded the stock and shares are sliding (TSLA)

Elon Musk

Shares of Tesla slid 3% on the markets’ open on Monday, to $314 after a Friday close at $324.

Morgan Stanley’s lead auto analyst Adam Jonas, a reliable Tesla bull, downgraded the stock from “overweight” to “equalweight” in a research note published Monday. He retained his target price at $305, however.

Jonas thinks that Tesla will struggle to deliver its Model 3 mass-market vehicle in 2017. The car is scheduled to launch in July, with a production ramp to follow. 

Tesla expects to produce 5,000 Model 3’s per week by the end of 2017, with that pace rising to 10,000 at some point in 2018.

Jonas thinks that only 2,000 vehicles will be delivered in 2017, while Tesla will sell jut 90,000 in 2018, figures that the analyst considers to be below investor expectations.

The $35,000 Model 3 is a critically important car for Tesla, as it transitions from selling all-electric luxury vehicles to pushing toward annual deliveries of 1 million by 2020.

Longer term, Jonas argues that Tesla is on the verge of facing massive competition from Silicon Valley tech companies that are casting their eyes on the potentially lucrative transportation industry.

“We are intrigued by how many investors wes peak with view Tesla’s biggest competitive risk as coming from the existing auto industry,” he wrote.

“We do not see it that way. We believe Tesla’s most important competition will ultimately come from the world’s largest, best capitalized tech firms. Many of these firms (such as Alphabet, Apple and others) are already testing fully autonomous vehicle fleets on public roads.”

He added:

While shared autonomy may not be a winner-take-all game, we have an increasingly difficult time imagining Tesla as the dominant player and as a stand-alone company longer term. We wonder if the firm is better off finding a partner that can help fund the necessary up-front investment while extracting greater value from the data produced by its machine-learning ecosystem. These may seem like issues that may take a long time to answer. But we wouldn’t be surprised if some of the early clues are on display within the next year or so.

Jonas’ views are consistent with his rather far-reaching thesis that the old business model of building and selling cars — cars that remain idle most of the time for their owners — will be replaced by a miles-driven model that favors shared mobility, autonomous cars, and software.

TSLA Chart

SEE ALSO: Elon Musk has discovered a new passion in life — and it could be Tesla’s best product yet

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May 15, 2017 at 07:11PM

from Matthew DeBord