Tesla's Stock Continues to Climb Due to Increased Market Presence
Morgan Stanley is telling clients the stock could rise another 50 percent...if all goes well.
One of Wall Street's top auto analysis firms, Morgan Stanley, has begun to push clients towards considering the very real possibility of a Tesla-dominated electric vehicle market, reports CNBC. In a note distributed last last week, clients were informed that not only have stocks begun to head in the right direction, but so have production numbers.
It appears that the firm was originally quite skeptical, estimating that there would be no volume of Model 3s through the remainder of 2017. They have since reversed this and have predicted a volume of 1,500 units delivered by the end of the year. Additionally, the firm believes that Tesla is certainly on track to meeting its goal of 10,000 units per week by the end of 2018. Morgan Stanley is so confident, a company analyst has upped his prediction from 90,000 units produced throughout that year to 120,000.
"We update our model with increased Model 3 unit forecasts, improved revenue and gross margin in energy, storage, and other, and (much) higher capex spend following earnings," Adam Jonas of Morgan Stanley said.
The main reason for the forecast is to accurately predict stock prices. Tesla's stock is notoriously overvalued, so much that even CEO Elon Musk isn't sure why people are paying so much. On Friday, Tesla stock closed at $357.87. which is about $38 per share more than the long term target prediction (though this number has also been increased by the firm by 4 percent). Jonas further predicts a bull run increase of 47 percent, potentially skyrocketing shares to between $512 and $526 before a correction occurs.
Why the sudden change? It appears that Wall Street has started to catch on to what automakers are shifting their focus to: electric cars. Jonas goes on to write that the price justifications are "fully explained by an increase in our valuation of the core auto business. Tesla remains a rather expensive call option on disrupting transport."
In 2016, the United States made up around 29 percent of the 547,000 EV sales across the globe. Tesla is predicting it will nearly double this number with an output of 520,000 vehicles per year by the end of 2018, claiming the majority of the market space. Its prospective self-identified top competitor in the electric market space, Volkswagen, has plans to stop the automaker in its tracks with at least nine new EV models released by 2025 (five from Volkswagen, three from Audi, and one from Porsche).
Historically Tesla has continued to top the charts for plug-in sales in the United States since 2015. Given its massive half-million-and-climbing reservation list for the Model 3, Tesla has positioned itself in a fortunate place. Not only are its current sales thriving, but future sales are predicted to increase significantly as well.
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