Tesla stock may rally 17%, says Morgan Stanley; Elon Musk’s EV giant-headed to massive production

n Musk’s electric vehicle behemoth Tesla could be in for a stellar 2022, which could see the stock price rally around 17%, said analysts at Morgan Stanley.

Elon Musk

Elon Musk’s electric vehicle behemoth Tesla could be in for a stellar 2022, which could see the stock price rally around 17%, said analysts at Morgan Stanley. In a recent report, Morgan Stanley’s Adam Jonas said that Tesla could be in for manufacturing 2 million units of its vehicles in 2022, which would be significantly higher than the 1.23 million the EV giant currently manages. For context, India managed to manufacture a little over 3 million passenger vehicles during the financial year 2020-21. Tesla stock is currently trading at $1,026 per share, down nearly 3% in the first week of 2022.

Factory addition to boost production

Analysts at Morgan Stanley have an ‘overweight’ rating on Tesla and have set a target price of Rs 1,200 per share, which is close to its 52-week high value. Morgan Stanley’s target price implies a 16.9% upside from current levels. “At this point we’d still describe 2 million as a stretch target but one that looks far more realistic following 4Q deliveries,” the report said.

While analysts expect 2 million units from Tesla in 2022, they believe that fully ramped, the addition of Berlin and Austin factories will take the Tesla global installed capacity to closer to 3 million units. Tesla’s Berlin and Austin factories are believed to be of significantly higher capacity than either Fremont or Shanghai. “However, given continued supply chain issues, we would apply a reasonable degree of caution to the pace of ramp for both new plants this year. Regardless, it appears that demand is not going to be a problem for Tesla in 2022,” they said.

Favorable economies

With the opening of the Berlin and Austin plants of Tesla, Morgan Stanely believes the uni economics will improve. Analysts estimate that is as high as a 2,000 basis point gross margin differential between Fremont and Shanghai plants of Tesla. “The opening of the Berlin and Austin plants offers an opportunity to achieve even higher gross margins, which we expect Tesla to eventually reinvest into product, service/network expansion, and price,” they added.

2022 to be Tesla’s year?

In 2021, Tesla’s stock price rallied a strong 49%. Entering 2022, the stock is likely to be driven by the ramp and economics of Giga Berlin and Austin, commercialization of the 4680 structural pack, commercialization of more audacious applications of Giga press, and geographic expansion into countries such as India, Australia, Vietnam, Russia, and Europe. Morgan Stanley analysts also believe that investors will soon be made aware of more new products, expanding Tesla’s vehicle portfolio.  

“We think that in 2022, investors will witness the emergence of a different Tesla organism from the chrysalis of self-inflicted struggle,” Morgan Stanley said. So far Tesla has failed to deliver consistent profits and strong cash flow, however, this is expected to change in 2022 with strong production on cards. 

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