Tesla gets a bullish outlook from Morgan Stanley. The company has become the firm’s Top Pick, replacing previous favorite, Ford.
Morgan Stanley analyst, Adam Jonas, published a new research note on Tesla on Monday. He reiterated an Overweight rating and a $310 price target on the company’s shares. The firm called the stock its “new top pick” in the US auto sector, noting a number of positive developments to improve the company’s metrics, according to EV.
In particular, Jonas noted in his comments that cost-cutting and restructuring measures have mitigated downside risks to Tesla’s auto business. The manufacturer’s second-quarter results were within 3-4% of the consensus forecast (excluding restructuring charges and regulatory credits), and exceeded Morgan Stanley’s expectations. In Q2, Tesla recognized more than $0.6 billion in restructuring charges. This, along with other actions, helped lower Tesla’s breakeven point, allowing it to generate positive cash flow.
The analyst noted that, while the company continues to make cars, it is actively redeploying incremental resources, technology, people, and capital away from the auto side of the business. Tesla has performed well, which is why it has replaced Ford as Morgan Stanley’s Top Pick.
“While Tesla is still making cars, we note the company is aggressively redeploying incremental resources, technology, people and capital away from the auto side of the house,” Jonas wrote Monday. “We found it notable that Ford management spent far more time on its 2Q conference call discussing EVs than Tesla did.”
Jonas believes that, as more traditional automakers, including Ford, abandon plans to make electric vehicles, Tesla “may achieve an even more dominant position in the market for highly lucrative ZEV credits going forward.”
