Things have been quiet on the Model 3 front these days, but there have still been plenty of headlines about Tesla Inc (NASDAQ:TSLA). Apparently, investors are hungry for an update on how Model 3 production is going, but that might no longer be the big story about the company. An analyst who was bullish on Tesla stock for years is now warning that there’s plenty of competition gunning for the EV maker. In fact, one company he sees as possibly posing a threat to Tesla one day might surprise you.
In a note to investors, Morgan Stanley analyst Adam Jonas suggested that the time to exit TSLA stock might be near. He said there’s been an “unusually high” number of investor questions about how Model 3 production is going lately, and he doesn’t feel that there’s enough transparency to offer a “high conviction view” on the production ramp’s trajectory. However, he assumes that the automaker has figured out the problems and is fixing them. He also suggests that any upcoming milestones for Model 3 deliveries could present a good opportunity to exit TSLA stock.
He once believed that in the long term, Tesla would eventually justify a valuation “far above” where it stands currently in terms of market valuation. However, now he sees a greater threat from competition. Interestingly, he named Amazon.com, Inc. (NASDAQ:AMZN) as a potential competitor for Tesla. The online retailer has shown that there’s no limit to the markets it wants to enter, so Jonas believes that it could have designs on the trucking industry as well.
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He notes that Amazon shelled out $46 billion in fulfillment and shipping expenses last year, so it is obviously motivated to shrink those expenses down as much as possible. At this point, it’s still too early to know whether Amazon will partner or compete with Tesla in trucking, but Jonas also noted that Amazon could leverage its massive scale in the shipping industry, potentially resulting in “surprisingly deflationary long-term trends in some of Tesla’s core initiatives.”
The Morgan Stanley analyst also mentioned Google’s Waymo, which is far less of a surprise than Amazon is. Waymo announced today that it is beginning a pilot program for autonomous trucks in the Atlanta, Georgia area. The company has also been reported to be planning to deploy autonomous driving fleets for its robo-taxi business by the end of this year. Further, there was a report that Waymo could partner with Uber for an autonomous ride-sharing program, although if that’s true, it would be especially interesting because the two firms are facing each other in court over alleged theft of intellectual property.
While Jonas offered a surprise turn on his long-time bull thesis for Tesla stock, there are still plenty of people left in the bull camp. Investor Place contributor Nicolas Chahine argues that the Street is overreacting on TSLA stock right now, saying that it’s still a good time to go long. He does agree that it’s a momentum stock, but it is that momentum which he believes provides an opportunity in the options market.
He estimates the floor on Tesla stock at about $300, but if it falls below that level, the next support level he sees is at $265. Based on these numbers, he suggests selling the April $260 “naked” put, which he sees an “85% theoretical chance” of capturing the maximum gains. However, he also points out that there’s a lot of risk inhere in this trade. He also suggests selling the April $275/$270 bull put spread, which he sees as having the same odds of winning.
Tesla stock tumbled by nearly 1% in intraday trading on Friday, falling as low as $322.37 per share.
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