Market analysts have a wide gamut of opinions when it comes to Tesla. While some say the disruptive EV brand is overvalued and its stock is bound to plunge, Wall Street firm Morgan Stanley has quite an optimistic outlook for Tesla.
According to a letter to investors, Morgan Stanley believes the population of Tesla vehicles will triple by the end of 2019. Even more ambitiously, Morgan Stanley predicts “the total number of Tesla vehicles in use (including Tesla Mobility and Tesla Consumer and net of scrappage) to be nearly 32 million units [by 2040], or 107x higher than the 2017 level.”
Why such drastic predictions? It has to do with a few things. For starters, while Tesla is still kind of in startup mode, it's a very fast growing company in an oligopoly famous for its high barriers of entry. Any brand that can make car companies that have been in the game for over a century sweat is a brand to keep a close eye on.
Secondly, the launch of the Tesla Model 3, the brand’s most affordable mass-market product to date, has a lot to do with the predicted growth for the company. Morgan Stanley seems to believe that in a few years, the Model 3 will be a common car that you’ll see on the road every day, especially in the coastal U.S. and Northern Europe.
So, how do these ambitious predictions translate to stock price? Not as favorably as you would think. According to Morgan Stanley, the most likely scenario is for Tesla stock to actually decline about 8 percent in the next 12 months. With growing business comes growing expenses. Even if Tesla does manage to establish the kind of market dominance this letter to investors implies, it will mean big costs to keep the ball rolling. It’s also worth noting that out of the many things Tesla is good at, making big profits isn’t one of them. So, according to Morgan Stanley, you shouldn’t be in a hurry to buy up Tesla stock, but you should hang on to it if you have it.
Do you think these predictions are accurate or do you think Tesla is headed in the opposite direction?