Tesla’s growth exposes it to growing macro, geopolitical risk – Morgan Stanley

Xiaolu Chu

Morgan Stanley analyst Adam Jonas warned clients that Tesla’s (NASDAQ:TSLA) rapid growth is leaving it increasingly vulnerable to macroeconomic and geopolitical risks that confront most major automakers.

Jonas told clients that while he still considers Tesla (TSLA) to be the best EV company in the world, the stock may “take a break” as the company grows into a true mass-market player.

“As Tesla becomes a larger company, expanding capacity further to what we see will be eventually 10 plants by end of decade, the company is, at the margin, exposed to the forces that impact mass market auto OEMs,” he advised. “As Tesla grows its volume base, we believe it may reflect the limitations of the broader EV supply chain that are not completely within Tesla’s control including the dependence of lithium and cathode material refining/processing in China and other far east market.”

He added that current battery supply chain dynamics are due for a “painful re-architecting” that could curtail EV earnings for a prolonged period of time. He anticipates such a dynamic could play out through to 2025. Additionally, Jonas warned that market expectations for advancements on autonomous vehicles are likely over-optimistic, exposing Tesla to a “reset risk around FSD/autonomy” in coming years.

“Our message to our clients is that Tesla in our view is still in the ‘must own’ category for any energy transition/BEV portfolio,” he concluded. “However, the company should not be seen as invincible to the rapidly changing consumer environment.”

Nonetheless, Jonas maintained a bullish $1150 price target on the stock alongside a “Buy” rating. He also maintained his long-term targets for production, with 8M units projected by 2030 as he anticipates the company can capture “just over 20% share of the global BEV market including 25% to 30% of the BEV market on an ex-China basis.”

Read more on Tesla’s latest SEC filing that disclosed new legal proceedings and updated Bitcoin losses.

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