There are big changes going on in the global electric vehicle market. Where once there was a severe lack of supply, the pendulum is swinging the other way, which could potentially lead to a glut of supply.
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This is the opinion of Morgan Stanley analyst Adam Jonas, who believes 2023 will be a year during which “execution on manufacturing costs and supply chain management will further separate the winners from the challenged.” To bring about more affordable electric vehicle prices that will facilitate further penetration, both will be needed. As expectations get a negative reset, capital “self-sufficiency” could also be “tested.”
In fact, as investors, buyers and regulators consider the unseen costs related to moving away from a Chinese dominated EV supply chain to a market where “many players have yet to prove viability of the business model,” Jonas thinks that over the next few years, the “rate of change of EV penetration” could potentially turn out to be something of a letdown.
The upshot of all this preamble is that there is one company better positioned than others to forge ahead as the undisputed EV leader. “Within our coverage,” says Jonas, “we believe Tesla (NASDAQ:TSLA) is uniquely positioned to lead engineering and cost improvements that have yet to truly unlock the scale potential of the EV economy.”
Investors should plan for greater “deflation” in the EV space over the near-term, with a negative reset to margin expectations. While Tesla could trade in a volatile ‘saw-tooth-like’ range for a while, before investors get more at ease with a floor in the stock’s valuation, Jonas thinks a “floor in the earnings must be reached.”
Down to the nitty-gritty, what does this all mean for investors? Jonas reiterated an Overweight (i.e., Buy) rating on TSLA shares backed by a $250 price target. Should the figure be met, investors will be sitting on returns of 103% a year from now. (To watch Jonas’s track record, click here)
Jonas’ objective is almost identical to the Street’s average target, which stands at $251.48 and is set to generate gains of 104% over the coming months. All in, the stock claims a Moderate Buy consensus rating based on 20 Buys, 9 Holds and 2 Sells. (See Tesla stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
