Tesla: Morgan Stanley Turns A Blind Eye To?Risks

Sep. 13, 2023 1:31 PM ET Tesla, Inc. (TSLA)

Summary

• Morgan Stanley raises Tesla, Inc.’s price target to $400, estimating that the Dojo supercomputer could add billions to its market cap.
• I agree with the bank’s estimates, and I actually reached a similar conclusion a few months ago.
• However, the bank completely overlooks the very significant risk posed by China at the moment.

Morgan Stanley’s Bullish?Thesis

Morgan Stanley has raised its price target for Tesla to $400, citing the potential of its Dojo supercomputer to add billions to its market cap. The bank estimates that Dojo could help Tesla increase its revenue from full self-driving (FSD) by $70 per share and its revenue from network services by $59 per share. This would add an additional $450 billion to Tesla’s market cap by 2040.

The Author’s?Concerns

The author of the article agrees with Morgan Stanley’s assessment of the importance of Dojo, but believes that the bank is overlooking the risks posed by China. China is Tesla’s second-largest market, and the author argues that the country’s slowing economy and increasing nationalism could pose a threat to Tesla’s business.

The author also points out that Chinese automakers are becoming increasingly competitive, and that Tesla could face challenges from these rivals in the future. For example, Geely (OTCPK:GELYF), a Chinese automaker, is preparing to unveil its new model by the end of 2023 in Israel. The Chinese automotive company is now unveiling a teaser version of its upcoming 001 model called FR (short for Future Roads), trying to compete with Tesla’s Model S Plaid.

The Author’s Conclusion

The author concludes that Tesla is a good investment, but that investors should be aware of the risks posed by China. The author also believes that Tesla needs to do more to address the challenges posed by Chinese automakers.

Additional Thoughts

In addition to the risks mentioned by the author, there are other factors that could affect Tesla’s business in the future. For example, the company is facing increasing scrutiny from regulators around the world. In the United States, the National Highway Traffic Safety Administration (NHTSA) is investigating Tesla’s Autopilot system for safety concerns.

Tesla is also facing competition from other technology companies that are developing self-driving cars. For example, Alphabet’s Waymo and Uber are both investing heavily in self-driving technology.

Despite these challenges, Tesla remains a leading player in the electric vehicle market. The company has a strong brand and a loyal customer base. If Tesla can address the challenges it faces, it is well-positioned to continue to grow in the years to come.

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