Morgan Stanley is out with one of the boldest calls I have seen in a while – Adam Jonas is upgrading Tesla Motors (NASDAQ:TSLA) with a $70 price target, representing almost 200% upside.
His Bull Case? $135 share – 460% upside. According to the firm Tesla will eventually become the 4th major U.S. Auto manufacturer behind GM, Ford & Chrysler.
There are few things in business as risky as starting an auto company – especially one that relies on entirely new technology that is not likely to be competitive vs. the established internal combustion engine for more than a decade. However, conditions are ripe for new entrants and we believe Tesla can be a significant volume player in the auto industry. We believe the market for xEVs (plug-in-hybrids or PHEVs and pure EVs) is underestimated as rising oil prices and government support accelerate the shift away from the internal combustion engine. This shift has made room for entirely new players to join the ranks of currently entrenched OEMs, and has afforded Tesla the opportunity to establish itself as America’s fourth automaker. The biggest risk remains Tesla’s own execution of its plan.
Tesla Motors (NASDAQ:TSLA): America’s Fourth Automaker? Morgan StanleyFlipping the chessboard: The confluence of structural industry change, disruptive technology, changing consumer tastes and heightened national security creates an opportunity for significant new entrants in the global auto industry. California dreaming? We don’t think so. In our view, the conditions are ripe for a shake-up of a complacent, century-old industry heavily invested in the status quo of internal combustion. The risks are high. So is the opportunity. Enter Tesla.
"8:09 (Dow Jones) Tesla Motors' (TSLA:$23.71,00$-0.21,00-0.88%) shares jump 13% to $26.90 premarket after Morgan Stanley labels it "America's Fourth Automaker" and upgrades stock to overweight from equalweight. Firm's new $70 price target is by far the Street's most bullish, according to FactSet, and implies TSLA can more than double by year end. Morgan Stanley estimates 5.5% electric car penetration globally by 2020, and 15% in 2025. Within ten years, TSLA can command 3.6% of the global market, firm thinks, but the question is whether the company can remain solvent long enough to capitalize on its break-throughs."
Any coincidence here? Jurvetson files a form 4 in late December disclosing distribution of part of his funds' TSLA shares and MS comes out several weeks later with a new higher target. Fast forward to March. Jurvetson files another form 4 disclosing more distribution and several weeks late here it is --another MS new higher target.