Tesla’s (TSLA) stock got an upgrade bull case at $500 per share from Morgan Stanley, but the firm’s best-case scenario is getting a lot of things wrong about the company, in our opinion.

Morgan Stanley analyst Adam Jonas has a strange approach to covering Tesla where he is significantly hedging his prediction with an extreme bear case of $10 per share, a base case of $250 per share, and a bull case of $500 per share.

In a new note to clients this week, he updated his bull case to account for the Cybertruck and an updated view on Tesla’s Shanghai Gigafactory.

He said about Tesla (via CNBC):

‘In an optimistic scenario,’ Morgan Stanley analyst Adam Jonas said he sees Tesla selling 100,000 Cybertrucks by the end of 2024, at an average price of $50,000. Additionally, Jonas believes Tesla’s Gigafactory in China could perform better than anticipated and reach a production rate of 450,000 units per year by 2024/2025.

However, Jonas makes it clear that he is not bullish on Tesla long term:

To be clear, we are not bullish on Tesla longer term, especially as, over time, we believe Tesla could be perceived by the market more and more like a traditional auto OEM [original equipment manufacturer]; we are prepared for a potential surge in sentiment through 1H20 but question the sustainability.

Adam Jonas is ranked No. 750 out of 5,727 Analysts on TipRanks with a success rate of 50% and an average return of 7.8%. He has been maintaining an equal-weight rating on Tesla’s stock over the last year:

Electrek’s Take

I think Jonas has chosen a really bad time to turn more bearish on Tesla.

Tesla managed to get Model 3 program to a rate of over 100,000 vehicles per year within the first year of production.

I don’t know why Jonas would think it will take two to three years for Tesla to get there with the Cybertruck.

In my opinion, Tesla will deliver over 200,000 Cybertrucks in 2024 and probably closer to 300,000 trucks.

Also, I have no idea how he gets to a $50,000 average sale price. Tesla has already disclosed the average sale price of orders, which currently is just over $56,000, and that’s before options.

I think it will be much higher with options, but let’s be conservative and use 200,000 Cybertrucks at $55,000. That’s already $6 billion more in revenue than Jonas is predicting in his bull case in 2024, and that’s just from the Cybertruck program.

So I see Jonas being very wrong on Tesla’s automotive business within the next decade, but where I think he is really missing the boat is on the energy business.

He thinks Tesla will be valued more like an auto OEM in the future, but I think Tesla will never be valued more like an auto OEM than now — even though it’s not very much being valued like one now.

The analyst is underestimating the potential of Tesla’s energy business.

When Elon Musk says that Tesla Energy is becoming a “distributed global utility,” and it could outgrow Tesla’s automotive business in the long term, he is not kidding.

Tesla has been quietly investing in a significant ramp-up of solar roof tile production at Gigafactory 2 and with Solar Roof V3, I believe it is selling very well.

Elon has previously mentioned a production capacity of 1,000 roofs per week.

That’s a $2.5 billion a year product, and I believe that Tesla will do even better with its solar retrofit products, like its new solar subscription program.

You add energy storage into the mix, and we are talking about a giant business that perfectly complements Tesla’s auto business.

Full disclosure: I am long TSLA.

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