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Tesla Inc (NASDAQ: TSLA) has enough cash and liquidity to make it through short-term economic disruptions from the coronavirus and continues to have a strong long-term thesis, Morgan Stanley said Thursday.
The Tesla Analyst
Adam Jonas upgraded the rating on Tesla from Underweight to Equal-Weight while trimming the price target from $480 to $460.
The Tesla Thesis
Jonas said in a note that Morgan Stanley was having to adjust some estimates, in particular resetting the expectation for Fiscal 2020 deliveries to 420,000 to account for an expected month of lost production at Tesla's Fremont, California plant as the coronavirus forces continued shutdowns of work nationwide.
"We would expect Tesla to shut the Fremont plant temporarily, in line with most global automakers," Jonas wrote.
But the company's prepared to weather the storm.
"We believe Tesla has sufficient liquidity and access to capital during this time," Jonas wrote. "The stock now trades below our revised $460 target and a more balanced risk-reward drives the move to Equal-weight."
Sell-Off Makes Stock More Realistic
Morgan Stanley had downgraded Tesla back in January in the midst of an enormous run-up in share price that had the stock trading close to $1,000. In the wake of the massive sell-off of the past week, the stock is now in more realistic territory.
"The impact of the COVID-19 sell-off has, in our opinion, brought the stock to a more attractive level, where we believe Tesla's share price and valuation today adequately reflects the value of the business," Jonas wrote. "Ultimately, we believe we are at a point where, while economic uncertainty leaves the stock in a volatile position, we believe the stock is in a place where investors can potentially begin to add exposure."
TSLA Price Action
Tesla shares were up 2.48% Thursday morning, trading at $370.20.
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