BUCKLE UP: Tesla is going to face extreme volatility in 2018, Morgan Stanley warns

Screenshot via NHTSA/YouTube2017 Tesla Model S crash test.
  • Tesla’s stock is facing serious volatility going into 2018, Morgan Stanley Analyst Adam Jonas said.
  • Negative long-term drivers could send Tesla shares down to $US200.
  • To keep track of Tesla shares, click here.

Tesla‘s stock is in for a bumpy ride in 2018 as the company faces serious headwinds that could send the stock sharply lower, Adam Jonas, an analyst at Morgan Stanley, wrote in a note to clients.

He anticipates the stock can climb as high as $US400 a share next year, from its current stock price of $US315, before crashing as much as 50% to $US200 if it can’t overcome certain challenges in the longer term.

“Following a hypothetical [first half of 2018] pop in the share price, we could see scope for longer-term risks in the story to come to the fore,” Jonas wrote.

Jonas said that Tesla’s target global market may not be as accessible as the market thinks and increasing competition from consumer electric and mega-tech giants could challenge its autonomous transport systems.

Though he admits that he can’t precisely predict the timing of when the stock will fall, Jonas did say that there were some positive drivers of Tesla’s stock in the short term, including a quicker-than-expected resolution to its production bottlenecks, a highly favourable working capital arrangement, and the willingness of suppliers to flexibly work with the automaker.

The company’s increasing challenge to reach a captivated market and to thwart encroachment from competitors could “stunt the enthusiasm” for Tesla’s stock, even after it overcomes its Model 3 production hurdles.

Tesla’s stock is trading higher by 2.45% at $US316.29 on Wednesday, and is up 46.92% for the year.

To see what a big Wall Street investor thinks about Tesla’s new big rig, click here.

NOW WATCH: Briefing videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.