Tesla Inc (TSLA) stock slipped after one bull downgraded it, although he did so with plenty of praise for the company, saying that ultimately, the company could “become the next Amazon or Apple.” However, he named Alphabet as a bigger concern right now than Amazon. Meanwhile, one bear says that the Model 3 is the only thing that matters for the company right now.
Tesla Inc (TSLA) stock downgraded to Equal-weight
In a note dated May 15, Morgan Stanley analyst Adam Jonas said he downgraded Tesla Inc (TSLA) stock to Equal-weight, although he also maintained his $305 price target. Interestingly, he said he sees Amazon, Apple and other tech giants as Tesla Inc (TSLA)’s competitors eventually, but he gave the reason for his downgrade as questioning “whether the risks of going head-to-head vs. the tech giants is sufficiently discounted in the price.”
After adjusting his model, Jonas said he now expects Tesla Inc (TSLA) to post GAAP losses until late 2019. He’s estimating $3.1 billion in cash burn for this year, which is more than the $2.3 billion he was projecting previously. He explained that these changes to his cash model would have cut his price target for Tesla Inc (TSLA) stock to $292. However, he was able to magically keep his $305 price target by “rolling forward the starting point of our DCF of the core business to May 1st (from Jan 1st), which he said offset the changes to his cash model for the company.
Apple, Alphabet to place Tesla under siege?
Jonas feels that “much larger and more well capitalized competitors” will one day soon reveal their own solutions for “sustainable transport and mobility.” Thus, he feels that Tesla Inc (TSLA) should prepare for “an assault by large tech firms on the market for shared, autonomous, electric mobility.” He emphasized again that he doesn’t believe Tesla Inc (TSLA)’s biggest competition will come from the current auto industry. Instead, he sees the company’s biggest threat as coming from Alphabet or Apple.
He upgraded Tesla Inc (TSLA) stock to Overweight in January, and he said two huge milestones have occurred since then. The first is the sudden push by Alphabet’s Waymo, which multiplied its autonomous Pacifica autonomous minivan fleet by six times. The second is the report that Apple had secured a permit to test autonomous vehicles in California.
Tesla stock is riding on the Model 3
Goldman Sachs analyst David Tamberrino reiterated his Sell rating and ultra-bearish $190 price target for Tesla Inc (TSLA) stock in his own note dated May 15. He highlighted his May 12 meetings with the company’s investor relations VP Aaron Chew, saying that investors were especially focused on the Model 3, gross margins, the possibility of cannibalization of the Model S and new products. Overall though, he said what emerged from the meetings was that nothing else matters to Tesla Inc (TSLA) stock holders as much as the Model 3.
In order for the company to justify its valuation, he said it must achieve its target of 5,000 vehicles per week in the fourth quarter. Tesla Inc (TSLA) management said stamping has been finalized and the body shop is being installed but general assembly isn’t fully installed yet. Production on the Model 3 is still slated to begin in July.
Tesla Inc (TSLA) stock declined by as much as 2.59% to $316.41 during regular trading hours on Monday.