EV maker is in position to boost its lead versus competitors in 2023, analyst Adam Jonas says
Shares of Tesla Inc. charged higher Thursday, to extend their bounce off a more-than two-year low, after Morgan Stanley said the recent sharp selloff has created an attractive opportunity to invest in the electric vehicle market leader.
The stock TSLA, +8.08% surged 5.7% in afternoon trading, after rising 3.3% on Wednesday. The bounce comes after the stock plunged 30.8% amid a seven-day losing streak, creating a deeply oversold technical condition, as it closed Tuesday at the lowest price since August 2020.
Even with the bounce, Tesla shares have still plunged 38.8% in December, putting them on track to suffer the biggest monthly drop since they went public in 2010.
Morgan Stanley analyst Adam Jonas said he believes the selloff was a result of increasingly unfavorable supply-versus-demand dynamics in the EV market, exacerbated by “technical factors.”
“We believe 2023 is shaping up to be a ‘reset’ year for the EV market where the last 2 years of demand exceeding supply will be substantially inverted to supply exceeding demand,” Jonas wrote in a note to clients.
It’s within this environment, however, that Jonas believes Tesla can thrive. He believes players who are self-funded with demonstrated scale and relatively low costs throughout the supply chain, like Tesla, can be relative winners.
He reiterated the overweight rating he’s had on Tesla since November 2020, saying the stock’s selloff amid EV industry concerns has created an “attractive entry point,” particularly relative to its competition.
“Between a worsening macro backdrop, record high unaffordability and increasing competition, there are hurdles to overcome,” Jonas wrote. “Yet we do believe that in the face of all these pressures, [Tesla] will widen its lead in the EV race, as it leverages its cost and scale advantages to further itself from the competition.”
Tesla is expected to outperform rivals, both legacy and start-ups, even before consideration of U.S. Inflation Reduction Act’s (IRAs) tax credits, where Tesla also stands out as the biggest potential winner, after they take effect Jan. 1.
Still, Jonas cut his price target on Tesla’s stock to $250 from $330, to reflect the market’s recent “de-rating” of EV makers.
Tesla’s stock has plunged 66.2% year to date, and was headed for the first yearly loss in seven years, and biggest yearly loss on record. In comparison, shares of Fisker Inc. FSR, +4.17% have sunk 56.0% this year, General Motors Co. GM, +3.50% have dropped 43.1%, Ford Motor Co. F, +5.39% have slumped 44.8% and the S&P 500 index SPX, +1.75% has slid 19.2%.