Tesla stock surged on Tuesday after the company said it has begun allowing non-employees to design the Model 3 cars they reserved. This is one high-flying stock that doesn’t look like it will stall out any time soon. However, one bull warns that Tesla stock could be sliced in half next year after reaching its next major milestone.
Tesla stock heading for $400
In a note on Tuesday, Morgan Stanley analyst Adam Jonas said that he expects Tesla stock to be “extremely volatile” next year. He sees two main stages ahead: one which carries the shares up to $400 and the second which could drag them down to $200. He expects Tesla stock to skyrocket as the production bottlenecks for the Model 3 are alleviated and then crash as investors finally begin to worry more about the “sustainability of the competitive moat.”
The first stage of Jonas’ vision for Tesla stock seems to be lurching into motion today. The automaker told Bloomberg in a text message that it has now begun allowing non-employees to configure their Model 3s. Investors seem to be taking this news to mean that Tesla has cleared up its production problems, as they’ve sent Tesla stock up by about 3% after letting it sink on Monday. Still, at $317.64, Tesla stock is still a long way away from its record high of $389.61.
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Jonas said in his note that he was assuming that the battery production bottlenecks would be “resolved in weeks.” He noted that the automaker’s Model 3 timeline always seemed “extremely aggressive,” and as a result, he believes management has built “unusual levels of flexibility” with its suppliers into their plan.
Tesla stock to fall on mounting concerns
The Morgan Stanley analyst looks for Tesla stock to pop to $400 in the first half of 2018 before long-term risks start to sink in for investors. He downgraded the shares in May for two main reasons. One is reason is because Tesla’s “global addressable market may not be as accessible as the market expects.” The other is growing competition from technology firms angling for “shared, electric and autonomous transport systems” that would compete with the EV maker.
Jonas predicts that as 2018 goes on, more and more evidence detailing the risks inherent in Tesla will be presented. He expects the evidence to curb investors’ enthusiasm with the automaker’s ability to overcome the production bottlenecks. He continues to rate Tesla stock at Equal-weight with a $379 price target because of uncertainty about the timing of the events he is expecting.
His note is particularly interesting because it almost suggests that he is changing his mind about the EV maker. He once was extremely bullish on Tesla, but even after downgrading it to Equal-weight, his notes had a rather bullish slant. This note, however, is certainly bearish in the long term.