Tesla (TSLA) Stock Rose 11.32% Despite Morgan Stanley Says It’s Still a Sell

UTC by Bhushan Akolkar · 4 min read
Tesla (TSLA) Stock Rose 11.32% Despite Morgan Stanley Says It’s Still a Sell
Photo: Paul Hudson / Flickr

Despite the massively weakening demand in the European market, the TSLA stock surged 11% on Monday beating down the bears. Reportedly Tesla is focusing on strengthening its position in the North American market.

On Monday, March 2, the Tesla Inc (NASDAQ: TSLA) stock gained over 11% with its price moving close to $750 but Morgan Stanley still asks investors to be cautious. This recovery came amidst the broader markets showing marginal recovery on Monday. Although the COVID-19 cases have been on a rise, investors pulled the markets up in hope of a possible stimulus.

Tesla (TSLA) stock has been the top performer on Wall Street since the beginning of 2020. With a mammoth run of over 100% gains in just the first 40 days of the year, investors have their eyes glued on it. Moreover, this has helped the electric car to be the second-most valued automobile company globally after Toyota Motor Corp (TYO: 7203).

With its strong Q2 2019 results and robust manufacturing set up, Tesla has been making an aggressive move to expand its presence in the global market. Earlier in 2020, Elon Musk inaugurated Tesla’s Shanghai gigafactory with a move to boost production. However, later that month, China declared the coronavirus outbreak across the country.

To prevent the spread, the government authorities asked companies and organizations to shut down their manufacturing activities. Reportedly, Tesla is also a victim of this shutdown that could possibly have an impact on its manufacturing output. Besides, after the Q4 2019, Tesla CEO Elon Musk promised around 500,000 Tesla model deliveries by the end of 2020.

Tesla Seeing Weaker Demand in European Market

Tesla’s stock move on Monday has surprised the investors as the TSLA stock gained despite the weakening demand in the European market. Note that after China, the European region has registered the second-largest number of cases.

Italy has been the most-affected European country with a number of cases popping out from Germany and the U.K. Last month, Tesla registrations dropped below 100 in Norway, against over 1000 bookings in February 2019. Similarly, the Netherlands saw a two-third dip in the registrations.

These figures are really concerning considering that Tesla has recently raised $2.31 billion in a stock offering. Tesla said that it will put this money for its expansion in the European market as it plans to set up another gigafactory, now in Germany. But now the question remains whether the European market ready to absorb Tesla products at the previously anticipated rate.

After its mammoth run over $900, TSLA plunged 27% last week over rising concerns of global coronavirus outbreak. Morgan Stanley analyst Adam Jonas asks investors to maintain caution when it comes to Tesla stock. He said that despite the recent correction, it will be too early for investors to jump in. He wrote:

“Even before fully accounting for the broader impacts of the coronavirus, we expect 1Q 2020 to be notably weak as Tesla works through the China production and Model Y ramp and deals with potentially weaker demand in certain European markets (i.e. Netherlands) after a strong 4Q and less accommodative incentive environment”.

Jonas has reiterated his “underweight” rating for the stock, keeping a target price of $55 i.e. 33% down from the current levels.

Why Did Tesla (TSLA) Stock Jump on Monday?

Despite all odds, Tesla managed a spectacular show on Monday. The stock price surged over 11% to move closer to $750. At yesterday’s closing, the TSLA stock is trading for a price of $743 with a market cap of $136 billion. So with the global markets just managing to hold further fall, what made Tesla shoot northwards?

Electric-car news publication Electrek explains that Tesla has asked its sales team in North America to deliver as many car deliveries in Q1 2020, as it was in Q4 2019. North America is one of the strongest markets for Tesla and the least affected by virus concerns. Tesla keeps its hopes alive and wants the momentum to continue further. The publication wrote:

“They are reporting strong demand in the first quarter and sources attribute it, at least partly, to the Cybertruck unveiling in November of last year”.

Electrek says that te Cybertruck unveiling has given an overall push to Tesla’s vehicle lineup by creating further interest among market consumers. The Tesla Cybertruck won’t hit the streets anytime before late 2021.

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Bhushan Akolkar

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

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