Morgan Stanley Fuels Tesla (TSLA) Short Squeeze With Bullish Report

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11:46:31 am on March 31, 2011

Morgan Stanley issued an extremely bullish report on Tesla (TSLA) this morning which sent shorts scrambling for cover and the stock soaring out of consolidation, up nearly 20% as I write this.  The firm upgraded TSLA to Overweight and set a base price target of $70 which is nearly triple what the stock was trading at before the report was issued.

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Here are some highlights of the report.  See Benzinga for more details.

– convinced electric cars will make up a significant minority of global light vehicle sales in the medium term and majority long term

– doesn’t see electric cars competing with internal combustion in a major way for at least 10 yrs

– Tesla has opportunity to establish itself as American’s 4th auto maker aided by high gas prices and government incentives

– Morgan Stanley sees a best case scenario price target of $135 but it’s not clear to me on what the time horizon is for that because they base it on long term targets for EV penetration (7% by 2020, 21% by 2025)

Technically, today’s surge changes the game for shares of TSLA from neutrality (as the stock quietly based) to bullish.  I’d be looking to add a position on any pull back (preferably 5-10% off today’s highs).

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