On Monday, Tesla (TSLA) surpassed Ford Motor (F) to become Morgan Stanley's top pick in the U.S. auto sector. Morgan Stanley’s autos analyst, Adam Jonas, predicts a 40% increase in Tesla's stock price and believes the company is effectively managing risks associated with its automobile business. Jonas stated, “While Tesla is still making cars, we note the company is aggressively redeploying incremental resources, technology, people and capital away from the auto side of the house…We found it notable that Ford management spent far more time on its 2Q conference call discussing EVs than Tesla did.” This fact gave Jonas the confidence to believe the company can thrive even if the once-projected booming demand for EVs scales back and becomes less strong.
Although Jonas cited this positive development, he also pointed out a concerning statistic, noting slowing growth in China for the company. Kit Norton, Investors Business Daily author, wrote, “However, Jonas also sees Tesla's growth story in China diminishing. Tesla China accounted for 18.2% of total Tesla revenues in Q2. Morgan Stanley projects that by 2030 Tesla China revenue will be around 10% of Tesla auto unit volume and just 6%-7% of total group revenue. ‘We expect the long-term trend for Tesla's China exposure to continue to fall systematically,’ Jonas said.” This forecast, while concerning, doesn’t seem to be a challenge the EV maker can't handle, as it’s continually gaining traction in the U.S. and other markets. The stock has seen high volatility in recent trading sessions, plummeting over 8% last week after a dismal earnings report, but reversing today and gaining 5.6% following the Morgan Stanley call.
Summary
On Monday, Tesla (TSLA) surpassed Ford Motor (F) as Morgan Stanley's top pick in the U.S. auto sector, with analyst Adam Jonas predicting a 40% increase in stock price and highlighting effective risk management. Despite concerns about diminishing growth in China, Jonas remains confident in Tesla's ability to thrive, noting its growing presence in the U.S. and other markets.
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