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While Tesla (TSLA) stock has corrected 60% in just over a month’s time, its valuations look to be attractive. With strong fundamentals in place, the stock could be a potential buy for the long term.
Since the beginning of 2020, Tesla Inc (NASDAQ: TSLA) stock has witnessed heavy trading volumes on Wall Street and attracted many investors who wanted to buy it. Earlier this year when the markets were roaring to its all-time high, Tesla stock appreciated over 100% up to mid-February.
At the time of writing, it is possible to buy Tesla (TSLA) stock for $436.24 (+2%). But today the stock has also managed to hit $477.
However, just within a month’s time, Tesla investors had to face a hammer blow with the global markets crashing. The Coronavirus pandemic has taken the global markets on a toss. Just in a month’s time, Dow Jones has corrected from its all-time high of above 29,000 all the way to below 20,000 levels.
Well, the Tesla (TSLA) stock has also corrected nearly 60% going to $350 on Wednesday, March 18. However, in a quick recovery on Thursday, Tesla climbed back above $400 closing somewhere close to $430 levels. Besides, Morgan Stanley analyst Adam Jonas has also upgraded Tesla from “Underperform” to “Equal-Weight”. Jonas has now put Tesla (TSLA) stock’s target price to $460 per share. At press time, Tesla stock is trading for $447 with a market cap of $81 billion.
Currently, Tesla is facing a major jolt to its production line since a majority of the cities are experiencing the COVID-19 virus lockdown. Besides, demand is likely to fall down significantly over the next few quarters are investors and retail buyers are running dry of cash. But we know that opportunities are always born out of adversities.
With Tesla stock taking a massive beating, this could be an opportune time for investors to buy for the long term. In its Thursday report, Morgan Stanley analyst Jonas explains that Tesla’s fundamentals remain intact despite the latest market disruption.
Tesla (TSLA) Stock – a Good Buy for Long Term
There’s no doubt that Tesla’s production line is facing severe jolt and slowdown due to the coronavirus pandemic. As per reports, Tesla’s Fremont factory is currently operating at only 25% of its capacity. Considering one month of lost production for Tesla at its Fremont factors, Morgan Stanley analyst has recently updated the delivery forecasts.
Jonas writes that considering all the damage, Tesla is likely to deliver 420,000 cars this year in 2020. This is 7% down from his previous estimate of 450,000 deliveries. Note that earlier this year, Tesla boss Elon Musk promised 500,000 Tesla model deliveries by the end of 2020. However, this was before the coronavirus pandemic hit globally. Things have taken a sharp turn over the last month as some experts are already predicting an economic meltdown.
But Elon Musk is a man of his words! As per the latest reports, Elon Musk is also looking to expand the manufacturing facility at its Shanghai gigafactory. Well, this could provide a major cushion to Tesla’s production output and get things rolling.
Besides, Morgan Stanley analyst also thinks that Tesla has a strong financial backup to recover from its current situation. If you must be knowing, just before the market fall Tesla raised a whopping $2.3 billion from its common stock offering. “We believe Tesla has sufficient liquidity and access to capital during this time,” Jonas wrote in a note.
Besides, Tesla is also sitting on an $8 billion cash which it can put to use anytime. This is at a time when other global automakers are struggling massively to make ends meet. On the other hand, the electric-car-maker is already ahead of its competitors with its superior technological prowess.
Thus, we believe that Tesla could potentially rise from the abyss much faster than its competitors. Here are the top five reasons why Tesla stock is a buy up to 2025.