Tesla stock tumbled almost 5% on Monday following a downgrade by Goldman Sachs. The stock has declined 11% since the company reported its quarterly earnings last week. However, Morgan Stanley analysts gave investors something to applaud in a note on Monday, saying the EV maker is looking to expand its revenue source by testing its luck in the insurance field.
Tesla wants to be more than an automaker
The note was based on Tesla’s fourth-quarter earnings call, on which Morgan Stanley analyst Adam Jonas asked if the company would consider offering insurance products to customers at lower rates. To this, Jon McNeill, Tesla’s president of global sales and services, replied that the company is already doing that, and in Asia, most Tesla cars are selling paired with the insurance products, which are tailor-made for the company.
During the earnings call, McNeill said, “It’s our vision in the future that we’ll be able to offer a single price for the car, maintenance, and insurance in a really compelling offering for the consumer. And we’re currently doing that today.”
Only a few weeks ago, Tesla did away with the word “Motors” in its name to go ahead with only the Tesla name. This was a strong indication that the company is no longer interested in confining itself to cars and wants to expand in areas such as solar panels, storage, batteries and now Insurance. It remains to be seen how far the company will succeed in its new role, but one thing is certain: that Tesla enjoys leaving the automobile industry awestruck.
“Car manufacturers, like Tesla, possess more data on the new safety features than insurers. This could enable them to better assess the potential risks associated with the vehicle and lead traditional insurers on matching risks with premiums,” Jonas said.
Analysts divided on Tesla’s fate
Last week, Tesla CEO Elon Musk stated that the new car will hit the ground in July, which is in line with the previous announcements. Goldman Sachs analyst David Tamberrino, however, felt that the company will face difficulties in meeting its deadlines.
This marks a rare event when two top brokerage houses have a stark difference of opinion about one company. While Goldman Sachs downgraded the stock to Sell, Morgan Stanley feels that investors should reward the stock sooner or later and decided to go ahead with its equivalent of a Buy rating and maintain its price target of $305, which is almost 24% up from current levels.