The race for EV dominance is on and new entrants are vying to catch up with undisputed sector leader Tesla (TSLA). With the segment still finding its feet, Morgan Stanley’s Adam Jonas says the race is akin to a marathon. The problem for the competition is Tesla is already way ahead of the pack.
“Tesla is in the lead at mile number 21,” said the 5-star analyst. “Everybody else is at mile 2 or still tying their shoes.”
Not only that, Jonas thinks Tesla is pulling further away, saying there are “signs that the industry leader is accelerating its lead over its EV peers, which should not be construed as a positive for the broader sector.”
Jonas’ ominous message for the so-called EV competition comes against the backdrop of Tesla’s most recent delivery update. In 4Q21, deliveries handsomely beat Street expectations while also coming in 20% above Jonas’ forecast and annualizing at more than 1.2 million units, which is “already above” his previous FY22 estimate.
As such, the analyst raised his FY22 delivery forecast from 1.22 million to 1.46 million. The “knock-on impact to profitability” means an increase to FY25’s Auto EBITDA forecast – from under $38 billion to just over $40 billion. In fact, by FY25, Jonas expects Tesla’s global EBITDA will be “greater than the global EBITDA of GM + Ford combined.”
Essentially, what Jonas is saying is if you’re bullish about the EV segment, then Tesla is the name to back. Or as the analyst puts it, “Not owning Tesla means not owning the one company that could make all other EV names obsolete.”
Accordingly, on the back of “higher top line and earnings assumptions,” Jonas increased his price target for Tesla from $1,200 to $1,300. Should the analyst’s forecast go as planned, investors will see returns of 26% over the next 12 months. No need to add, Jonas’ rating stays an Overweight (i.e., Buy). (To watch Jonas’ track record, click here)
Most of Jonas’ colleagues are also on Tesla’s side, although the positivity is by no means unanimous. Based on 25 Buys, 9 Holds, and 6 Sells, the stock has a Moderate Buy consensus rating. Overall, most appear to think the shares are currently fairly valued; going by the $1,032.3 average target, they will stay range-bound for the foreseeable future. (See Tesla stock forecast on TipRanks)
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.