Tesla, Inc. TSLA reported Wednesday forecast-beating quarterly results, and an analyst at Morgan Stanley thinks the quarter is bearish for legacy automakers.
The Tesla Analyst: Adam Jonas has an Overweight rating and $900 price target for Tesla shares.
The Tesla Thesis: Tesla is the most valuable and highest margin major car company in the world, Jonas said in a note. The company is also striving to be the cost leader in EVs, he added.
The combination, the analyst said, is potentially disruptive for the legacy players.
Tesla is in a position to be a cost leader in the EV market due to its manufacturing innovation, battery innovation and scale, Jonas said. The company has the potential to market a vehicle at a $15,000 price point or less, likely this decade, if not before 2025, he added.
Such a battery, though not capable of going 500 miles or from 0 to 60 in less than 3 seconds, can be safe, reliable, easy to manufacture, and be supplied with readily available and securely sourced raw materials, the analyst said.
Related Link: Tesla 'Margin Story' Taking Hold, Stock Priced to Perfection, Analysts Say After Q3 Print
Tesla, the world's largest and most advanced EV maker, is also the most profitable company, in terms of margins, the analyst noted. The company will likely invest this margin into price, capability and scale, he said.
The company also has access to capital and talent, according to Jonas. The analyst said he thinks Tesla is in a position to direct large amounts of capital in the most concentrated ways.
Tesla's credit rating is at parity to that of Ford Motor Company F and is slightly below General Motors Corporation GM, despite a market cap 12 times higher than GM and 16 times higher than Ford, the analyst noted.
Tesla has the size and scale to operate profitably, Jonas said.
"While we don't expect vertical integration of OEMs into mining at this stage, we believe Tesla has the ability to own a mining company if it wanted to," Jonas said.
Tesla Price Action: Tesla closed Friday's session at $909.68, up 1.75% for the session.
Related Link: Top 10 Companies By Market Cap Then (2001) and Now Has Only Microsoft In Common; Here's Elon Musk's Take On It
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