(Bloomberg) -- The narrative around Tesla Inc. is the most cloudy that it’s been in years and signs of weakening demand have resurrected long-standing questions about the electric-vehicle maker’s ability to fund itself as an independent company, Morgan Stanley said.
Tesla shares are down nearly 20 percent this year, a decline that reflects rising market concern about demand for its electric cars, especially as the company announced multiple job cuts. Jitters spurred by the exit of several high-profile executives and a continued tussle with the U.S. Securities and Exchange Commission have also weighed on the stock.
“We continue to see Tesla as fundamentally overd but strategically underd,” Morgan Stanley analyst Adam Jonas wrote in a note to clients, wondering at what point “might strategic alternatives enter the discussion.”
The analyst identified megatech platforms and legacy automakers as the two primary genres of potential strategic interest in Tesla. “The megatechs such as Apple, Google and Amazon all have independently expressed their views over the importance of key auto and transport 2.0 domains such as electrification, connectivity and autonomy,” said Jonas, who has the equivalent of a hold rating on Tesla.
On the other hand, legacy automakers are still in the early stages of allocating $100 billion to $200 billion of expenditure towards electric cars and self-driven vehicles over the next five years, Jonas said. “Could a potential investment in Tesla be seen as a form of R&D substitution/talent acquisition that could put them in pole position while attaching Tesla’s capital consuming business model to a far larger entity with greater resources?”
This year is expected to be a tough one for Tesla as the company expands in Europe and China and continues to scale up the production of its Model 3 sedan. Chief Executive Officer Elon Musk warned as much in January, saying the road ahead was “very difficult.”
More bullish analysts say that while these near-term uncertainties will continue to weigh on the stock, the long-term potential for Tesla is still strong. Wedbush analyst Daniel Ives, who rates the shares the equivalent of a buy, said Tesla’s target of producing enough batteries for 7,000 Model 3 cars per week is a “very attainable” goal by year-end and will be a “clear competitive moat over the coming years vs competitive electric vehicle forces in the U.S., Europe, as well as in China.”
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