How Tesla Stock Can Be Overvalued And Substantially Undervalued At The Same Time

Notwithstanding mushrooming competition and talk of market share erosion, Tesla, Inc. TSLA is still the unparalleled leader in the electric vehicle race.

The company is likely to lead the auto pack into transitioning away from the fossil fuel economy, according to a Morgan Stanley analyst. 

The Tesla Analyst: Adam Jonas has an Overweight rating on Tesla with a $1,300 price target.

The Tesla Takeaways: Tesla is a conundrum to investors, as it is both overvalued and undervalued at the same time, Jonas said in a note.

If the company is considered a pure car company and the valuation is worked out purely on the units sold times the average selling price of cars, it could come off as an overvalued company, the analyst said.

Yet the company is substantially undervalued as a "renewable energy on-shore infrastructure company," he said.

The Russia-Ukraine war and inflation, Jonas said, have worked in unison to engender energy innovation.

"We believe events over the past 2 months and catalysts over the next 6 months can materially shift the narrative around what Tesla does, and the markets they address, the growth profile and the global/strategic implications of the ecosystem on which they sit atop," the analyst said. 

Related Link: Where Will Tesla Stock Be In 2030? Analyst Weighs In

While Tesla is taking advantage of its direct-to-consumer sales model, legacy OEMs are constrained by powerful state dealer franchise laws, he said adding that new EV startups can follow Tesla's direct-to-consumer lead. 

Over the next 12 months, investors will get a better view on how Tesla and other automakers are key to transition away from fossil fuels and into renewable energy, Jonas said.

The analyst estimates that almost $20 trillion to $40 trillion will be spent over the next 20 years in accumulated capital expenditure and R&D toward this goal. Only 3% of this has been allocated and 1% spent so far, he said. 

"The global renewable energy/global capex cycle is where the real alpha is, in our opinion." 

TSLA Price Action: Tesla shares were down 3.76% at $983.88 midday Thursday, according to data from Benzinga Pro.

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Photo courtesy of Tesla.