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Tesla (TSLA) drops to near value stock level, says analyst

The beating that Tesla’s stock (TSLA) has been through has brought it down to near value stock level, says a Morgan Stanley analyst.

Tesla has been delivering record numbers of vehicles, revenue, and profit lately, but it’s not being reflected in its stock performance. The Tesla (TSLA) stock is down over 30% since August:

In comparison, the NASDAQ is down only 8% over the same period.

After trading at multiples over its revenue and earnings for years, Tesla is now getting into the range of a value stock, according to some analysts.

Morgan Stanley analyst Adam Jonas, a longtime Tesla bull, came out with a new note to clients this week in which he noted that Tesla’s stock is getting closer to his $150 per share bear case and that makes it more attractive on an EBITDA multiple basis:

Tesla shares would trade at approximately 12.5x EV/EBITDA and 23x PE on our FY25 forecast (SBC burdened) which we see as excellent value for a self-funded, 20 to 30% top-line grower in top position to benefit from re-architecting the US on-shore/near-shore/friend-shore renewable supply chain at scale.

The analyst believes that it is creating a “window of opportunity opening for prospective Tesla investors.”

Morgan Stanley is reiterating its overweight (or Buy) rating with a $330 price target, which represents a significant upside over Tesla’s current stock price.

Electrek’s Take

Top comment by Steve Peterson

Liked by 32 people

I think part of the reason for Tesla stock to drop is that it's apparent Elon isn't spending any time running Tesla right now, and it's unclear when he might start paying attention to it. Also, competition for Tesla's EVs is widespread, and coming in large numbers over the next couple of years. This will force Tesla to drop prices (as they are starting to do in China) and (hopefully) add more features, as the technological lead the company has is diminishing. Tesla's sky-high vehicle margins will be coming down, and this puts pressure on the share price.

I think Elon should find a good CEO for Twitter and for Tesla. Gwynne Shotwell has done a great job at SpaceX; Musk needs to find the equivalent for his other companies. My guess is Musk will stay focused on Twitter for some months, until he stumbles upon a plan for the future of the app that actually shows some traction. He hates to lose, and I'm sure if he keeps trying long enough at Twitter he'll find something that works. At least well enough for him to declare victory and go spend time on other companies.

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It’s clear that Elon Musk is at least partly responsible for this drop in value – both directly by selling billions of dollars’ worth of Tesla stock during the period and indirectly due to some investors losing confidence in him over the Twitter situation.

But it is creating an interesting situation where Tesla seems actually concerned about its stock price for the first time since they actually needed it to be high in order to raise more capital.

The company’s board has confirmed talks about starting a stock buyback program worth between $5 and $10 billion. This would certainly help, but it’s hard to say by how much.

It’s better to focus on the core business which remains strong for Tesla, and it is expected to get stronger next year – especially in the US – after regaining access to the federal EV tax credit.

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