“Master Plan 3, the path to a fully sustainable energy future for Earth will be presented on March 1. The future is bright.”
No, that’s not a quote of the promotional poster for the latest Marvel blockbuster, but rather one of Elon Musk’s more hyperbolic utterances and which refers to Tesla’s (NASDAQ:TSLA) upcoming investor day.
While that sounds typically bombastic, Morgan Stanley analyst Adam Jonas thinks such a statement should be taken very seriously indeed – particularly by Tesla’s EV rivals.
“We think the investment community may be underestimating the obsolescence curves underlying much of today’s EV and battery technology in production today,” said the analyst. “It is very possible that Tesla’s March 1st investor day may have greater significance on the market’s perception (and ultimately, valuation) for Tesla’s EV competitors than for Tesla itself.”
Elon Musk’s aim has always been for Tesla to become a mass-market manufacturer (whilst also reducing the auto industry’s carbon footprint), but in order to do so, the company will need to both offer lower prices whilst at the same reduce costs to preserve their industry leading margins.
With its aim of offering a car priced at $25,000, Tesla will need to make significant progress from the FY22 COGS per vehicle of ~$39,000. And Jonas thinks the company might be readying to announce how it intends to do so.
The tidbits that have so far tricked out regarding Tesla’s ‘Project Highland’ – a nod to the moving assembly line Henry Ford introduced at his Highland Park, Michigan factory in 2013 – is to “significantly revamp” the Model 3 components and interior. And that is important because as the competition in EVs gathers pace amidst the rumblings of a deflationary EV environment, “doubling down with a re-vamped Model 3 can bring new enthusiasm and cost savings.”
As such, at the upcoming investor day, Jonas is looking for Tesla to reveal a “suite of technologies needed for the mass adoption of EVs at far lower price points.”
All told, Jonas rates Tesla shares an Overweight (i.e., Buy) along with a $220 price target. (To watch Jonas’s track record, click here)
Most on the Street, however, think the current share price is just about right; at $202.46, the average target suggests the shares will stay rangebound for the foreseeable future. Rating wise, the stock garners a Moderate Buy consensus rating, based on 22 Buys, 6 Holds and 3 Sells. (See Tesla stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.