“We Are Not Bullish On Tesla Longer Term”: Morgan Stanley Updates Outlook With Stock At $420

Not just content to watch Elon Musk make first grade level jokes about Tesla’s stock hitting $420 earlier this week…

Whoa … the stock is so high lol

— Elon Musk (@elonmusk) December 23, 2019

…Morgan Stanley felt as though it was necessary to make a joke of their own, by issuing an update note (for some reason) on its Tesla target, which we had previously reported was located somewhere in the gaping hole between $10 and $500. 

The investment bank’s previous stance on the company was summed up in this exceptionally vague chart pointing out that Tesla stock could go – well, anywhere – over the next 12 months. 

…and third, Jonas points out that the most “common criticism” he is fielding is how he could have a bear case as low as $10, while maintaining a bull case at $500. We wonder why…

But when it boils down to brass tacks, Jonas makes the admission (in bold print, no less) that “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 OEM; we are prepared for a potential surge in sentiment through 1H20 but question the sustainability.”

Tesla being viewed as a traditional OEM would likely collapse the company’s share price, as the market is notorious for valuing low margin, capital intensive auto companies with minuscule earnings multiples. Additionally, Tesla doesn’t even have consistent earnings, so even applying a crippling P/E to the company in this case could prove difficult. 

However, like any good analyst with a $490 spread between their bull and bear case, Jonas closes his note with some backhanded reasons for optimism:

We believe 2020 offers a strong event path for the stock; there are a number of catalysts over the next year, whether it be China milestones, Model Y, or new technology announcements that would allow Tesla to potentially test the upper bound of our admittedly wide bull-bear skew. We still see Tesla as fundamentally overvalued, but strategically undervalued.

Whatever you say, Adam.