Morgan Stanley’s Adam Jonas says Tesla $100 bear case may be ‘in play’

Tesla may have further to fall in the near-term despite its long-term potential, according to Morgan Stanley. “We do not believe Tesla will get credit as an AI company as long as core auto earnings are being revised down,” wrote widely-followed Tesla bull Adam Jonas. “This process may take a few more quarters to see through, over which time our $100 bear case may be ‘in play’,” the analyst wrote in a report Thursday. The $100 bear case suggests that Tesla could fall more than 40% from Wednesday’s close. Shares of the electric vehicle maker have come under pressure in recent months, falling 33% this year, as competition mounts in China and demand wanes. Earlier this week, Tesla reported an 8.5% decline in first-quarter deliveries compared to a year ago. These issues could hamstring Tesla near term, but Jonas expects deliveries to find a bottom in the second quarter. In fact, he views Tesla as a combination of an auto, energy, AI and robotics stock, noting that its auto business represents only 20% of Morgan Stanley’s $310 price target valuation. “At the same time, however, we believe investors should not ignore the continued developments of Tesla’s other plays, many of which are auto-related (i.e. the recurring revenue opportunity from the Tesla fleet – embedded in our Tesla Network Services valuation) and other areas that we do not include within our $310 target,” he said. The $310 price target, down from a previous $320, suggests that Tesla stands to gain 84% from Wednesday’s close over the next 12 months. Jonas reiterated an overweight recommendation on Tesla in his report.