Tesla has had an interesting end to the year, with the debut of its cybertruck and progress on its factory in China, prompting analysts at Morgan Stanley to revisit the firm’s bull case for the electric vehicle maker.
The verdict: Tesla’s best-case scenario lands the stock at $500 per share.
That price target is $60 better than Morgan Stanley’s previous bull case price target.
Of the updated outlook, $20 results from bullish sentiment on the company’s new pickup truck and $40 from expectations of incremental Tesla China volume and profitability.
The $500 price target compares with Morgan Stanley’s base case of $250 and bear case of $10 per share.
At last check on Friday, Tesla was trading up 2% at $337.
“We assume that in an optimistic scenario, by year-end 2024 Tesla is able to sell 100,000 cybertrucks at an average selling price of $50,000 and EBITDA margins of 20%. At 6 times EV/EBITDA and a 12% discount rate, this implies a per-share value of $20 to TSLA,” analyst Adam Jonas wrote.
The firm also noted that according to CEO Elon Musk’s tweets, Tesla already has 250,000 preorders for the vehicle. Morgan Stanley estimates that about 40% of those preorders will be converted into actual sales by 2024.
Meanwhile, Morgan Stanley said that its base case for Tesla China is conservative, with sales in the region peaking at about 250,000 by 2024/2025. For its bull case, the firm adds another 50,000 vehicles sold with revenue per unit of $40,000.
Still and all, Morgan Stanley has concerns about Tesla’s long-term prospects. Jonas rates the stock equal weight.
“To be clear, we are not bullish on Tesla longer term, especially as, over time, we believe Tesla could be perceived by the market more and more like a traditional auto original equipment manufacturer," Jonas wrote.
"We are prepared for a potential surge in sentiment through first-half of 2020 but question the sustainability.”