Tesla TSLA Gets PT Boost to $900 from Morgan Stanley, The ‘Apex Player’ in Sustainable Energy Transition

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Ahead of Tesla's (NASDAQ: TSLA) Q1 2021 report, Morgan Stanley has updated its model, raising its price target to $900 from $880, and sees Tesla as the apex player during the most formative phase of the industrialization of sustainable propulsion and transition off of fossil fuels.

Adam Jonas of Morgan Stanley has updated the model as Tesla's deliveries of 184,800 in Q1 are more than 20% higher than their forecast. The firm also adjusted its volume forecasts for the rest of the year to reflect a good start. As a result, Morgan Stanley raised its FY 2021 delivery prediction by 3% to 809,000 units. The firm noted that their fiscal year volumes are slightly below the consensus forecast as they allow for a 'margin of safety' given supply chain challenges that continue to impact the industry. Taking into account these various considerations led the firm to raise its price target to $900 from $880.

Jonas points out that investor sentiment about Tesla's prospects in China is waning. However, in his opinion, this is a good sign, as the firm believes that the market expectations for Tesla in China are too high in the long term. At this point, the manufacturer has seized the opportunity to start a successful business in China, thanks to which it was able to significantly improve production processes and increase efficiency. For now, Morgan Stanley believes that Tesla China can actually provide most of Tesla's profits today. Tesla, in turn, can make a significant contribution to the growth of the Chinese electric vehicle market. According to the firm, by 2021, Tesla's share of the Chinese BEV market will be approximately 14-15%.

Morgan Stanley expects Tesla to continue expanding its product lines, factories, and vertical integration for the rest of the year. The firm, like many others, believes that Tesla is "the apex player during the most formative phase of the industrialization of sustainable propulsion and transition off of fossil fuels." As part of this transition, Tesla will need to address any number of green battery and supply chain challenges. Tesla, the firm continues, has “an opportunity to lead the industry to address these potential flaws in the EV/Battery ecosystem as they stand today."

H/T @SawyerMerritt/Twitter

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