A one-time Tesla bull at Morgan Stanley is grasping at straws to explain why the investment group believes the Silicon Valley automaker is not vastly overvalued.
Tesla CEO Elon Musk believes the Model 3 maker could one day rival fellow tech company Apple, but the only way he can realize the automaker’s true market value is to compete with the likes of Uber and Lyft, analyst Adam Jonas wrote in a research note Monday.
Jonas doesn’t believe that the Model 3 launch will help the company create value, nor does he value Musk’s other ventures: solar roofs, autonomous semi-trucks or Tesla Powerwalls. But he does suggest the car manufacturer’s rider-sharing project, which doesn’t currently exist, could kick the company’s value into overdrive.
“In our view, there’s only one market big enough to propel the stock’s value to the levels of Elon Musk’s aspirations: that of miles, data and content,” Jonas wrote Monday in a note to investors.
He was referring to Musk’s so-called Tesla Network, a supposedly transformative rider-sharing idea. Analysts can’t wait forever on this idea to eventually come to fruition, Jonas added. “In our view, this quiet period probably cannot last much longer.”
Tesla raised its market capitalization to $51 billion in April, a number that is valued at about $1.7 billion more than GM. The two companies have wrestled for supremacy.
There is significant debate over whether Tesla’s recent surge is sustainable, given Musk’s chronic inability to deliver products on deadline. Some analysts say the old metrics of valuation do not apply to Tesla because investors and the public believe the company is upending the auto market.
Other analysts have also noted pessimistic views about the company’s future. Bank of America (BofA), for instance, believes Tesla’s acquisition of SolarCity could drag down the automaker’s valuation.
Tesla shares will fall within the next year to $165, a 46 percent drop from where the stock closed in April at $308.03 a share, according to BofA research analyst John Murphy. He claims the Silicon Valley company will lose $2 per share over the next year, which is up from the $0.25 loss per share he forecast earlier this year.
Goldman Sachs mirrored much of BofA’s concern.
Tesla has done good work producing electric vehicles, Goldman Sachs’ analyst David Tamberrino said in February, but “our concerns are more near-term oriented with respect to operational execution on the Model 3 launch, an unproven solar business, and cash needs.”
Tamberrino was also worried the company would have to sell stock to raise $1.7 billion needed to make room for a possible loss if the Model 3 doesn’t meet expectations. The financial institution ultimately downgraded the company from “neutral” to “sell.”
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