Tesla In 2018: Morgan Stanley Predicts An 'Extremely Volatile' Year

Between its solar segment, battery business and diverse auto units, Tesla Inc TSLA’s equilibrium rests multiple variables.

The firm is the paragon of diversification, but its guiding principle hasn't shielded it well from instability. Some on the Street expect Tesla's automotive exposure to trigger imminent stock volatility.

The Rating

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

The Thesis

Jonas expects Tesla’s stock to strike $400 in the near term before potentially falling below current values to the low $300s. (See Jonas' track record here.) 

“We expect Tesla shares to be extremely volatile in 2018, divided into two stages: (1) The alleviation of production bottlenecks with strong cash inflow and (2) mounting concerns over the sustainability of the competitive moat,” Jonas said in a Tuesday note. 

The first phase predicted by Morgan Stanley assumes Tesla’s baked-in scaling flexibility and ability to accrue early ramp working capital through favorable payment negotiations with eager suppliers. The latter is marked by mounting competition from autonomy-focused tech firms and in global markets.

“Admittedly, we cannot be precise with the timing of positive (1H) and negative (2H) catalysts that could move the stock significantly in the quarters ahead, leaving us EW on the stock,” Jonas said. 

Price Action

At the time of publication, Tesla was trading up 2.39 percent at $316.14. 

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Photo courtesy of Tesla.