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Don’t Be Afraid Of Tesla Motors Volatility

Tesla Motors Inc (NASDAQ:TSLA) stock has been known to be uneven, hitting a high of $280 per share in September and falling down again at the end of 2014. Again on Thursday, the stock moved up over $200.

Tesla stock and volatility

Investors who are confident in the future of the electric car maker “have to go along for that ride” in volatility, believes Adam Jonas, head of global auto research at Morgan Stanley. Talking on CNBC’s Squawk Alley, on Thursday, the analyst said, “If you can’t handle that type of thing this stock is not for you.”

Jonas stated that the stock will be accompanied by continued volatility owing to its mission to “change the world fundamentally,” but even then the stock is a good choice for investors who believe in the company. “We can still justify [$280 per share] as a niche manufacturer with really fun-to-drive vehicles,” the analyst said.

Price target lowered

Recently Morgan Stanley lowered its price target on Tesla Motors from $290 per share to $280 owing to a number of factors such as the stronger U.S. dollar, lower oil prices and slow sales in China. Even though Tesla Motors stock was up Thursday, it still represents a good buying opportunity, believes Jonas, who maintains his Overweight rating on the stock.

In a recent research report, Jonas said he trimmed his fourth quarter estimate from 11,165 to 9,993 units. After the revised estimate, the full-year tally comes to 31,814, which is over 1,000 units below the company’s own guidance. Jonas also lowered his gross margin estimate from 29.6% to 28% owing to the lower volume estimate and the strengthening of the U.S. dollar.

Talking about the impact of the strengthening U.S. dollar, Jonas noted that the company could see continued pressure owing to the amount of exposure it has to international markets. For Tesla, more than half of its sales come from outside the U.S., while its production is fully based in the U.S. Jonas estimated that around 30% of Tesla’s sales will probably come from Europe this year. So if the euro weakens by 10% against the U.S. dollar, it could mean a $100 million loss for Tesla (excluding any hedging efforts).

According to the analyst, overall sentiments are positive on Tesla Motors, primarily due to the company’s technology, which many believe will makebtraditional car engines “obsolete” in a few years.


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