Morgan Stanley and JPMorgan Analysts Differ on Overvalued Tesla Stock

UTC by Benjamin Godfrey · 3 min read
Morgan Stanley and JPMorgan Analysts Differ on Overvalued Tesla Stock
Photo: Depositphotos

Adam Jonas believes Tesla has the right developmental products in place to open up addressable market opportunities that will help build and sustain its price potential in the future.

The innovative strides of Electric Vehicle (EV) automaker Tesla Inc (NASDAQ: TSLA), which has translated into boosted share price has stirred a valuation difference between analysts from Morgan Stanley (NYSE: MS) and JPMorgan Chase & Co (NYSE: JPM). According to an exclusive report from Bloomberg, the differing position on Tesla stock by the duo of Morgan Stanley and JPMorgan analysts is born out of a long-term perception of the sustainability of the stock performance.

Tesla Growth and the Morgan Stanley Backing

Tesla has seen unprecedented growth in its stock performance this year with an outstanding record of over 490% increment. The stock according to the Bloomberg report has returned about 18,000% returns to the company’s investors since the company made its public market debut in 2010. The growth surrounding the company’s stock price pushed its iconic Chief Executive Officer Elon Musk to tweet back in may noting that Tesla’s share price is too high.

This has forced the company to implement a 5-for-1 stock split in order to make more retail investors be able to afford the stock. Despite these moves, the stock has continued to add massive gains, and Tesla as a company is more valued than other auto brands such as General Motors Company (NYSE: GM), Ford Motor Company (NYSE: F), Toyota Motor Corp (TYO: 7203), Volkswagen AG and BMW AG combined.

Amid this growth, Morgan Stanley has the equivalent of a Buy rating on the stock with a price target of $540. The analyst Adam Jonas believes the company has the right developmental products in place to open up addressable market opportunities that will help build and sustain its price potential in the future.

“Out of our $540 price target, $254 is attributed to the core auto manufacturing business, $154 to the network-services business opportunity, $58 to the potential of becoming a supplier of batteries and powertrain to third parties, $38 to the mobility and ride-sharing business opportunity and $25 to the insurance and energy business,” Jonas said in an interview with Bloomberg.

Differing Position

Despite the justification, the Morgan Stanley analyst gave for staying bullish on Tesla stock, JPMorgan Chase analyst Ryan Brinkman believes Tesla has no basis to have a valuation that exceeds those of more traditional auto brands such as Toyota and Volkswagen who both sold 22 million units thus far this year, as against the Elon Musk lead company with a maximum projection of just 500,000 vehicles.

“Tesla’s valuation now is nearly two times that of Toyota and Volkswagen combined, but those two companies together sold 22 million vehicles last year. They generated $40 billion of earnings before interest and taxes,” Brinkman argued speaking to Bloomberg. “So is Tesla going to grow to approximate something like two times the earnings of the two largest automakers in the world today combined?”

Consequent upon this, Brinkman noted that his firm’s new price target for Tesla s $90, a valuation which will still place it larger than the valuation of General Motors. Nonetheless, Tesla’s investors are in for a bigger payday, partly by the company’s inclusion in the S&P 500, as well as its prospective products and services to be rolled out soon.

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Benjamin Godfrey

Benjamin Godfrey is a blockchain enthusiast and journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture.

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