Tesla Motors Inc NASDAQ:TSLA slumped drastically on Monday, dropping 9% to $253 per share at the close. The dip in the stock is seen as the after-effect of a report from Morgan Stanley analyst Adam Jonas on Monday, in which he maintained an Overweight rating on the stock but noted various “sobering factors” for investors considering the stock.
Driverless cars could impact Tesla
One of the primary factors that Jonas noted is “Our 15 year [discounted cash flow] coincides with the end of human driving and the dawn of crowd sourced mobility and mega fleets.” The analyst then questions what the strategic and competitive advantage Tesla Motors Inc NASDAQ:TSLA will hold at that time to justify itself as a “provider of mobility.” Jonas further notes that the environment is changing fast and that to adapt “the (disappearing) steering wheel,” many auto makers are also changing, citing an example of BMW.
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The reference of a “disappearing” steering wheel might be in connection to Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG)’s self-driving car concept, which is a futuristic technology.
EVs’ success depends on breakthroughs
Jonas added that the demand of Tesla’s Model S and Model X in China will be far more than the supply over future quarters due to inadequate dealers and service infrastructure. However, the analyst noted that the high acceptance of electric vehicle needs “breakthroughs” that may be too unreasonable to take for granted as a base case. On this basis, Jonas considers Tesla a niche player and not a mass manufacturer.
In the report, Jonas also noted that the shift towards electric vehicles is slowing down. “EVs are failing categorically on a global scale,” the report says, and he adds that many big names in the auto industry have put their EV development plans on the back-burner and are supporting hydrogen as the “future of emission-free transport.”
Still bullish on Tesla
Despite the “sobering factors,” the Morgan Stanley analyst does not restrict himself to one aspect and believes that despite the risks, the stock is worth $320, “but perhaps not as quickly and not for some of the reasons we believe are driving the market.”
In the end, Jonas said that he believes in Tesla Motors Inc NASDAQ:TSLA’s strategy and sticks to the claim that it is the world’s most important car company. However, he expects the stock not to rise so consistently and “one directionally” from the present point.