Bloomberg News/Landov
Tesla Inc. stock is at a crossroads, with a sharp move downright or upward possible, making the Silicon Valley car maker the “ultimate high-risk” concern in autos.
That’s according to analysts at Morgan Stanley, known Tesla bulls, in a note titled “Tesla’s next move: $200 or $400?”
The analysts led by Adam Jonas kept their rating on the stock at their equivalent of neutral, but dialed back their price target to $376 from $379 a share. That would represent 27% upside over Wednesday’s prices.
“We see the next three months as the most critical time in Tesla’s history since the Model S launch six years ago,” the analysts wrote in a Wednesday note.
For all that it was long on questions, the note was short on answers. It listed the main investor concerns, including the expectation that Tesla may not need to tap capital markets this year, as the company has vowed, but may want to raise money. Morgan Stanley has modeled for a $2.5 billion capital infusion from an equity raise in the third quarter.
Moreover, they said they don’t expect Tesla to be able to produce Model 3 sedans at a rate of 5,000 a week by the end of the second quarter. More likely, the company will achieve that run rate around the end of the ourth quarter, the analysts said.
According to an email leaked Tuesday and reported to be from Tesla Chief Executive Elon Musk, Tesla is aiming at a “steady” Model 3 production rate of 6,000 a week by the end of the year, with the goal of achieving that rate around the second quarter to build a cushion and to keep a promise to get to 5,000 a week by the end of the second quarter.
More ominously, the Morgan Stanley analysts said that Tesla might be “too big to fail,” set to employ around 50,000 people in the next couple of years, and every job in an auto maker is believed to support around seven jobs in the economy.
Tesla shares have lost 1.5% in the past 12 months, versus 16% gains for the S&P 500 index and a 21% advance for the Dow Jones Industrial Average.