On Monday, November 14, Tesla (NASDAQ: TSLA) stock closed at $190.95, 2.56% down compared to the previous close at $195.97. However, Morgan Stanley believes the decline in TSLA’s share price over the past few weeks may not be all bad for Tesla investors.
Tesla stock has been dropping lately. Some investors and financial experts are pinning Elon Musk’s Twitter takeover as the cause of TSLA’s recent decrease.
Last Wednesday, Tesla shares dropped significantly, closing at $177.59, the lowest since November 2020. At the time, Elon Musk disclosed the sale of about $4 billion worth of TSLA stock. In an all-hands meeting with Twitter the following day, Musk explained that he sold Tesla shares to “save” Twitter.
Throughout his quest to take over Twitter, Elon Musk has offloaded TSLA shares multiple times this year. In April, He sold about $8.5 billion worth of Tesla shares, and then another $6.9 billion shares in August.
Morgan Stanley’s Tesla Take
Morgan Stanley has a $150 bear case for Tesla. However, the investment bank believes Tesla’s recent price drop is a “window of opportunity opening for prospective Tesla investors.” Morgan Stanley thinks Tesla sentiment and decelerating EV demand might challenge its bear case before the end of 2022.
Tesla recently cut its prices in China. Morgan Stanley predicts that the company would also slash car prices in Germany as Giga Berlin reaches 5,000 vehicle production per week. It also expects Tesla to cut prices in the United States in the first half of 2023. The price cuts may be an opportunity for prospective Tesla customers.
Twitter and Tesla
In a recent note to investors, Morgan Stanley (MS) analyst Adam Jonas wrote that investors are concerned about the effects “consumer sentiment” might have on Tesla’s business in the near term. Jonas wrote that consumer sentiments could materialize in several areas, namely:
- Consumer sentiment/demand.
- Commercial partnerships.
- Government relationships and support.
- Investor sentiment and capital markets participation
“Controversy creates uncertainty…In our opinion, one of the main drivers of Tesla shares to ‘tera-cap’ status in recent years was the ability for investors to confidently model the economic outlook for the company’s core EV and energy storage businesses supported by a favorable economic backdrop. In recent weeks, this confidence has been tested, and we believe will continue to be tested through year-end,” wrote Jonas.
Twitter has become a controversial topic in recent weeks. Some Tesla investors have reservations about how Musk plans to monetize the platform and use it as a space for free speech.
Consumer and Investor Sentiment
MS believes some customers and investors might want to distance themselves from any Twitter controversy. Elon Musk’s involvement in Twitter has led some to question their ties to Tesla, although the two companies are entirely separate.
Morgan Stanley believes that Tesla still needs support from investors to surpass its current market cap. As of writing, Tesla’s market cap stands at $602.97 billion.
Tesla prides itself as a self-reliant, vertically integrated company. But it still relies on commercial partnerships with companies that might want to distance themselves from controversy.
Although, usually, association with Tesla has proven beneficial to other companies. For instance, mining companies who have struck deals with Tesla often also strike deals with other automakers.
Elon Musk’s recent activity on Twitter and changes to the platform have also created some tension between the Tesla CEO and some political leaders in the United States.
Last week, U.S. President Joe Biden commented that Musk’s relationships with other nations needed observation. Musk’s ties to other countries are heavily related to Tesla’s operations, considering the company has gigafactories in China and Germany.
Musk’s ties to other nations and his political opinions on Twitter have contributed to the controversy surrounding Musk, the platform, and, in extension, Tesla.
Disclosure: I am long TSLA.