Morgan Stanley analyst Adam Jonas believes the decline in Tesla’s stock price is an opportunity for investors.
Tesla Motors shares are down almost 25% from their high in September, but investors must not abandon the stock, according to Morgan Stanley Research analyst Adam Jonas. The analyst believes the stock will move up heading into spring.
“Classic” opportunity for investors
“We expect a pivot in news flow and outlook for Tesla on several fundamental fronts, triggering a recovery in the share price,” Jonas said.
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The analyst noted that a strong U.S. dollar and low oil prices have damaged the confidence of investors,but added that the decline in the share price provides a “classic opportunity to increase exposure to what we see as the world’s most important auto company.”
Jonas listed a few factors that could push Tesla stock higher in the coming months. For one thing, Tesla is making efforts to expand its product line-up. The company will start offering the Model X crossover later this year and recently upgraded its Model S with a dual-motor version that can speed up from 0 to 60 mph in a few seconds. An enhanced Model S will improve the volume and transaction price, Jonas said, and added, “The cars are getting better… and more fun.”
China to remain a problem for Tesla
Even though demand for Tesla’s cars is in question now, primarily due to a sales hiccup in China, Jonas believes the new line-up will make demand robust again. However, the analyst also acknowledges that China will remain a concern for the car maker and that he expects the region to account for only 6% of total deliveries in 2015 and 10% in 2016.
Another factor that makes Jonas bullish on Tesla is the company’s progress on the battery production front. Even though the so-called “gigafactory” will not be able to mass produce “cells with full automation in Nevada” before 2017, Jonas expects Tesla to share some details of the “prototyping of the design well ahead of that.” The analyst believes the batteries manufactured by Tesla will be used by many sectors, such as the automobile, solar and electric grid markets.
Talking of the Model X, Jonas said that though the release has been delayed several times, the vehicle will be available by the third quarter.
On Tuesday, Tesla closed up 3.52% at $218.36, which is below the $286 a share high in early September. Jonas expects the stock price to climb to $250 by spring.