Tesla Is Overvalued: Investors Are Treating It Too Much Like A Tech Company, Says Morgan Stanley

Analysts from Morgan Stanley on Tuesday warned that Tesla stock, at over $1,000 per share, is grossly overvalued and set to plunge, with too many investors ignoring the risks of running a car company and instead treating Tesla like a high-growth tech company.

 

After surging to record highs of over $900 per share in February, Tesla’s stock plunged amid the coronavirus sell-off in late March, falling below $400 per share.

 

But shares have since seen a strong rebound: Tesla is up 130% since the market’s coronavirus recession low point on March 23, and now trades for over 1,000 per share.

 

In a note to clients on Tuesday, Morgan Stanley analyst Adam Jonas warned that while he understands the “attraction of the Tesla story” and its high-growth potential, it is still hard to see Tesla justifying its high stock price over the next decade.

 

He gives the stock a $650 price target and an “underweight” rating, warning that investors are ignoring “a host of execution/market risks” facing the company.

 

Morgan Stanley said that it forecasts Tesla to make 2 million cars annually for the next 10 years, but its current stock price implies a much higher production output: “At $1,000, we believe the stock is discounting roughly 4 million units” by 2030.

 

The company’s high valuation is coming from “tech-oriented investors” who see Tesla’s valuation as reasonable and “in the framework of discussion” amongst large-cap tech names like Amazon, Google or Apple.

 

But comparing Tesla to these tech giants is far from perfect, Jonas says: It still faces a multitude of risks associated with running a car company that the market seems to be ignoring.