By Senad Karaahmetovic
Morgan Stanley analysts conceded that Elon Musk’s recent deal to take Twitter private is affecting “some consumers’ sentiment” regarding the electric vehicle (EV) maker.
Tesla (NASDAQ:TSLA) stock momentum is clearly bearish amid investor concerns “over the potential for effects on consumer sentiment that could impact Tesla’s business near term.” From the recent discussions with Tesla investors, the analysts noted that some said they do not wish to be associated with the controversy surrounding Musk and Twitter.
“While Tesla is largely self-funding today, to achieve the growth implied in its current $600bn market capitalization will require a continued strong relationship with the investment community,” they added in a client note.
Moreover, the recent EV price cuts in China signal that demand may be decelerating. The analysts say Tesla could follow up and may launch price cuts in Europe “as Giga Berlin begins to surpass production of 5k units/week,” while the U.S. price cuts could be introduced at the beginning of the next year.
As a result, the analysts see the potential for Tesla stock price to trade near $150 per share before year-end, which is Morgan Stanley’s bear case price target. This would imply a drop of over 20% in Tesla stock from Monday’s closing price, ultimately offering a “window of opportunity for prospective Tesla investors.”
“At our $150 bear case price, Tesla shares would trade at approximately 12.5x EV/EBITDA and 23x PE on our FY25 forecast (SBC burdened) which we see as excellent value for a self-funded, 20 to 30% top-line grower in top position to benefit from re-architecting the US on-shore/near-shore/friend shore renewable supply chain at scale,” the analysts concluded.
At 07:00 ET (12:00 GMT), Tesla stock price is up about 1% in pre-open Tuesday after closing at $190.95 yesterday.