Tesla Motors Inc sales estimate has been drastically reduced by one of the company’s biggest fans, Adam Jonas of Morgan Stanley. The auto analyst believes declining oil prices could impact the company’s future growth.
Sales estimates slashed
In a note released on Wednesday, Jonas said he thinks Tesla will be able to sell just under 300,000 cars by 2020, which is way below the 500,000-car target given by the company itself.
At the end of October, the value investor Mohnish Pabrai gave a presentation and took part in a Q&A session at Boston College and Harvard Business School on the Uber Cannibal Investor Framework, which he has developed over the past decade. Uber Cannibals are the businesses “eating themselves by buying back their stock,” the value Read More
The long-time Tesla bull believes the lower-priced mass market Model 3, which is expected to be launched three years from now, will be the biggest drag on sales. Jonas also questions the expected $35,000 price range of the Model 3 and now believes the price could be around $60,000.
“While nobody buying a Model S today (for nearly $105,000) is doing so to save on their monthly expenses, the longer-term story is far more dependent on the volume success of the Model 3,” analyst wrote in the note, and added, “Oil price is a factor for Model 3.”
Despite his comments, the Morgan Stanley analyst still recommends Tesla as a Buy, but he did reduce his price target on the EV maker from $320 to $290.
Increased expectations from Tesla
Jonas views investment in Tesla as being riskier than it was when the stock was trading at $25. The risk is primarily due to increased market expectations “that suggest very high mass market volume targets in just a few years.”
The comments from Jonas appear to hold relevance, as market expectations for Tesla today are much higher than they were in 2010. Tesla has been the only successful automotive start-up in decades. It was easy to write-off the company in its initial days, but now it has become so big that everyone expects too much from it.
Tesla shares are down 31% since hitting their record-high in September. Over the same period, oil prices have come down 42%. Despite the recent decline, shares of the Elon Musk-led company are still up by over 30% for the year.
Ascendiant Capital Markets analyst Theodore O’Neill also believes Tesla’s share price is moving in correspondence with oil prices. There is a possibility that shares are trapped between low energy prices and an end-of-the year sell-off says the analyst. O’Neill has a Buy rating on Tesla with a price target of $320.