XAutoplay: On | Off Tesla (TSLA) was downgraded to equal weight from overweight by Morgan Stanley, saying its biggest competitors will not be the major automakers but large and well-capitalized tech companies such as Apple (AAPL) and Google-owner Alphabet (GOOGL).
Morgan Stanley analyst Adam Jonas in a research report said “there have been numerous developments that suggest to us the continued preparation of an assault by large tech firms on the market for shared, autonomous, electric mobility.”
He said two important milestones are plans by the Waymo outfit of Alphabet to sharply expand its self-driving car program, and the revelation that Apple has become the latest firm to secure an autonomous-driving permit in California.
As of April 2017, Jonas wrote, there are 30 companies with autonomous-vehicle testing permits issued by the California Department of Motor Vehicles. In addition to Alphabet, Apple and Tesla, others include China’s Baidu (BIDU) and Nvidia (NVDA).
Waymo, the autonomous-driving subsidiary of Alphabet, announced an alliance Sunday evening with ride-hailing service Lyft, Uber’s main rival.
Jonas maintained a price target on Tesla of 305.
Tesla stock was down 2.1%, near 317.80 during morning trading on the stock market today.
IBD’S TAKE: Tesla, an IBD Leaderboard stock, fell on the Morgan Stanley downgrade but quickly recovered above its 10-day moving average. The stock is extended now after a breakout in early April from a cup-shaped base.
Jonas updated his model on Tesla following its first-quarter earnings report that missed on the bottom line but showed its Model 3 production ramp-up is on schedule.
His adjustments take into account higher spending on research and development as well as spending on sales, general and administrative costs and increased capital expenditures. He expects Tesla “to remain loss-making on a U.S. GAAP basis until late 2019.”
Among other downsides for Tesla, Jonas said he does not believe China will become a significant long-term market available to Tesla. And he said scenarios of adjacent businesses like solar, storage and trucks “are not enough to significantly move the needle on Tesla valuation,” he wrote.
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