Tesla (TSLA) is coming off a bumpy year.
The company has seen its stock spike or plummet more than 10% more than a dozen times this year, as bad news followed good and vice versa. While the company itself has hit production goals and posted its best-ever results in the most recent quarter, distractions about the company and its CEO Elon Musk were widespread, including Musk being stripped of his chairman position after an SEC investigation.
Morgan Stanley analyst Adam Jonas is uncertain about Tesla’s future. The analyst maintains his Equalweight (hold) rating and $291 price target, which implies nearly 12% downside from current levels. (To watch Jonas’ track record, click here)
Jonas says there is potential for Tesla to takeover General Motors’s plant in Lordstown, Ohio, after GM announced it would close operations there. The analyst believes this makes sense for Tesla, as the company is “expanding rapidly and will soon need more plants, more equipment, more supply…more people – most of which will be in the US.”
The analyst notes that “Tesla has a history of taking over unused plants (Toyota and GM’s old NUMMI plant in Fremont) at steep discounts ($42mm).” In order for this to happen, Jonas cites three requirements: “(1) a free (or nearly free) cost to acquire the plant, (2) a labor contract that does not involve a traditional UAW/collective bargaining agreement (like their current Fremont, CA plant), (3) extension of the $7,500 Federal tax credit for the purchase of EVs or other incentives to encourage the early adoption of EV technology. Tesla would also enjoy a substantial PR benefit from any successful deal that saves jobs.”
That $7,500 federal tax credit is important. At the beginning of next year (just next week), the tax credit will be cut in half. This has caused concern among some investors believing that demand will wane as the price of a Tesla will increase. This is especially true for the Model 3, which is Tesla’s attempt to compete with non-luxury brands on price.
It appears the voice of the Street backs Jonas’ sidelined vantage point on the electric car maker. Out of 25 analysts polled in the last 3 months, 10 are bullish, while 7 remain neutral and 8 are bearish. With a return potential of nearly 5%, the stock’s consensus target price stands at $337.74. (See TSLA’s price target and analyst ratings on TipRanks)