Morgan Stanley lead auto analyst and reliable Tesla bull Adam Jonas got a bit less bullish on Monday when he lowered his target price to $333 a share from $450.
He’s still bullish — the stock is currently trading at about $195, and Jonas’ target is well above Tesla’s peak of $291 — but he’s a bull who’s worried about two things.
First, he thinks the forthcoming Model 3 mass-market electric car will be later than Tesla expects, more expensive, and in a cheap-gas environment, less popular than many anticipate.
“We expect the Model 3 to be a really nice car, just a bit rarer than many expect,” Jonas wrote in a research note.
He and his team don’t think Tesla will make a 2017 launch date for the vehicle. Jonas’ team also believes the Model 3 will be priced at $65,000 — not $35,000, as the company has said.
The delays, in Jonas’ view, will come from Tesla focusing on Model X SUV production.
He thinks this knocks $25 per share off his previous $450 target.
Second, he thinks Tesla may not be primed to compete in a world where car sharing is ascendant and individual car ownership is declining.
This is the big hit to his target: negative $61.
Jonas is no stranger to offering his views on the future of mobility, and to his credit, he has long argued that Tesla will struggle to achieve mass-market status.
But his Model 3 take is somewhat confusing. It’s entirely possible the Model 3 launch will be pushed back to 2018, as he suggests. We won’t know until the vehicle gets closer to actual production.
But on balance, even though Tesla may put a lot of resources into getting the Model X right, the Model 3 should be a far simpler vehicle to build. A traditional automaker could build millions of compact cars in a very short time — there’s no reason why Tesla shouldn’t be able to do that same.
Tesla may have at times struggled with manufacturing issues, but carmakers have been making cars for over 100 years. It wouldn’t be that hard for Tesla to make a lot of compact cars.
However, if Jonas is right, then Tesla may have a shorter road to profitability. True, its market cap of over $25 billion may plunge — that’s based in the notion that Tesla has lots of future growth from disrupting the traditional auto industry.
If all Tesla has to do is make a handsome profit on its cars and trucks, then Model 3 delays could force it to aim more directly for the luxury market with the vehicle. The Model S and X are luxury cars, and although the luxury slice of the market isn’t large, it is lucrative.
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