Morgan Stanley: Electric Car Market Won’t Be Significant As Previously Thought, Downgrades Tesla (TSLA)

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12:17:52 pm on December 8, 2011

Morgan Stanley has some credibility issues this morning.  Back in March the company was wildly bullish on shares on Tesla (TSLA) and set a base price target of $70/share with the potential for a $135 price as a best case scenario target.  They were convinced that electric cars would make up a significant minority of light vehicle sales in the medium term and a majority in the longer term.  They mentioned the potential for Tesla to be part of a Big 4 of auto manufacturers.  What a difference a few months make.  Perhaps some profits are needed on a short position.

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The firm downgraded the stock this morning from Overweight to Underweight and slashed the price target from $70 to $44, saying that electric cars are not ready for prime time.  What a 180.  Analyst Adam Jonas now sees electric cars making up just 4.5% of the global car market by 2025, about 50% less than the previous estimate of 8.5%.  This is a downgrade of the entire industry and Tesla is along for the ride.  It should be noted that Jonas actually sees Tesla market share rising vs previous forecasts.  Just a bit bigger piece of a much smaller pie. 

It’s no surprise Tesla (TSLA) stock is getting hit this morning, down over 10% at one point.  However, it’s actually a normal pull back after a big surge over the past several weeks, with the stock testing key support at the 50 day moving average in early trading.  Currently, the stock is well off the lows and it would appear that the major moving average will hold and that the uptrend will remain intact.  Of course that will depend largely on what the overall market will do.

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