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July 7, 2020 11:00 AM, EDT

Tesla Bull Case Raised Above $2,000 a Share at Morgan Stanley

New Tesla vehicles sit in a lot.New Tesla vehicles sit in a lot. (Luke MacGregor/Bloomberg News)

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Morgan Stanley analysts lifted their bull-case price target for Tesla Inc. to $2,070 after an “extraordinary” rally saw the stock overshoot a previous best-case scenario of $1,200. But they still don’t recommend buying Tesla shares.

After better-than-expected delivery numbers in an “extremely difficult” second quarter for the auto sector, Tesla now appears less risky than other carmakers, analyst Adam Jonas said.

“Tesla has demonstrated one very powerful differentiating quality versus many of its auto peers: demand is holding up better,” Jonas wrote in a report to clients, noting that quarterly volume fell only 5% versus a year ago. By comparison, General Motors Co., Fiat Chrysler Automobiles NV, Toyota Motor Corp. and Nissan Motor Co. all saw U.S. sales drops of at least 34% in the quarter.

 

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“To our knowledge, there will not be any high scale global original equipment manufacturer with anywhere near this level of year-on-year resilience,” he wrote, noting that investors are increasingly comparing Tesla against highly valued technology firms instead of legacy carmakers.

Tesla shares jumped 14% to close at about $1,372 on July 6 amid a broader market rally, extending their year-to-date gain to 228%.

Despite the bullish commentary, Jonas maintained an underweight rating, saying the market has done “more than a good enough job” of discounting the investment opportunity, while it has not sufficiently discounted risks like the sustainability of profit in China and “inevitable” competition from tech firms like Amazon.com Inc. and Alphabet Inc.

Jonas lifted his regular price target to $740 from $650, suggesting downside of 46% from the July 6 close.

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