|Can so many shorts -- 52% of shareholders in the case of Tesla Motors -- be wrong?|
NEW YORK ( TheStreet) -- Tesla Motors ( TSLA) hit another 52-week high on Monday. How can a stock that has more than 50% short interest as a percentage of float sail past all market resistance, from the defection of its top engineers to fears that electric car batteries will burst into flames? A good place to begin to answer the Tesla "Teflon" question is in Morgan Stanley's view of the electric car company. Morgan Stanley has a $44 price target on Tesla shares and a sell rating. This would make simple market sense if Tesla was currently above $44, but it isn't. In fact, in racing to another 52-week high on Monday, Tesla shares hit an intraday mark of $36.29. Morgan Stanley has taken the rare position on the sell side of having a price target that signals a buy but a rating that instructs investors to underweight Tesla shares.
While some Wall Street analysts scratch their head at the Morgan Stanley position, Morgan analyst Adam Jonas said it's simple: Morgan doesn't believe in hold ratings and has either an overweight or underweight on all shares. While Morgan likes the Tesla story long-term, given the stock's run-up -- 50% in the past year and 87% since its 2010 IPO -- it is risky relative to other stocks in the Morgan Stanley transportation universe, and even if it still has stock upside it's less upside with more risk than other ideas. "We get a lot of questions about the $44 target and sell rating. At Morgan Stanley we have one-third to two-third of stocks at underweight at any one time, while many on the sell side reserve sell ratings for stocks about to go bust. We have no equal weights, and when we downgraded with a $44 price target, Tesla had 25% upside whereas the average stock had 50% upside," Jonas explained, adding, "Given the start-up risks we can't look clients in the eye and say 'overweight Tesla.'" This Morgan Stanley comment brings us to Tesla trading trigger No. 1: