Morgan Stanley: Tesla Investors Have A Profit-Taking Opportunity

After a string of missed targets, Tesla Inc TSLA could finally be on the brink of getting its Model 3 production on track. One Wall Street analyst sees the milestone as a great opportunity to sell the stock.

The Analyst

Morgan Stanley analyst Adam Jonas reiterated an Equal-Weight rating on Tesla with a $379 price target.

The Thesis

Reaching production targets is the first step in a long journey for Tesla, and there’s simply not enough visibility to recommend buying the stock at the moment, Jonas said in a Friday note. (See the analyst's track record here.) 

Improving cash flow numbers and the potential to hit near-term Model 3 targets should give Tesla a sentiment and share price boost, the analyst said. 

“Where we have substantially higher conviction on the Tesla story is our longer-term thesis that the company will face greater levels of competition than the market anticipates in the domains of electric vehicles, autonomous vehicles and shared mobility,” Jonas said. 

Jonas named four major long-term risks to Tesla’s business for investors to consider: 

• Amazon.com, Inc. AMZN may end up a competitor to Tesla in the businesses of transport, trucking and logistics.
• Waymo, the auto unit of Alphabet Inc GOOGGOOGL is leading the pack of AV competitors, logging more than 5 million test miles. Waymo expects to have an AV fleet deployed by the end of 2018, potentially beating Tesla to the market by five years.
• Global EV infrastructure will require 10 to 20 years and “many trillions of dollars” to construct.
• China may prove a challenge for Tesla due to increasing regulation of foreign companies collecting data on Chinese drivers.

Price Action

Tesla stock traded was down nearly 1 percent Friday and is now down 5.2 percent in the past six months.

Related Links:

Elon Musk's Thoughts About China, Tariffs And Import Duties: 'Like Competing In Olympic Race Wearing Lead Shoes'

Gene Munster: Tesla Could Add Billions In Revenue With Ride-Sharing

Photo by Brett Hershman.