Morgan Stanley analyst says Tesla is likely to drop back to the mid $200 level

Tesla’s
stock has hit the CEO’s takeout value of $420 per share on Tuesday. Despite the
recent surge, however, Morgan Stanley analyst sticks to his earlier statement
that the stock is likely to drop sharply to $250 in the upcoming months.

According
to Adam Jonas of Morgan Stanley, at $420 per share, Tesla’s share prices are outsized
for a can manufacturer. He further added that it is only a matter of time
before the investors begin to treat Tesla as a car manufacturer and not a tech
company. In such an event, Jonas stated, the stock can be expected to lose
traction and find support in the mid $200 level that is comparable to the share
prices for other auto manufacturers.

Tesla’s
Market Cap Will Drop From $75 Billion To $45 Billion

If
the Jonas’ $250 forecast comes true, Tesla will see a significant drop in terms
of market cap from the current $75 billion to $45 billion that marks a 40%
reduction in a relatively short period of time.

The
$250 mark for Tesla’s stock isn’t a memory of old time. The stock was last seen
trading around this level in October 2019. Printing upbeat performance results
in the third quarter, Tesla had gained around 20% in October. The U.S based
electric car manufacturer has noted a remarkable 60% growth in its share prices
in the fourth quarter.

The better than expected performance for Tesla this year is largely attributable to its production house in China that is currently under construction. Shanghai’s Gigafactory is the first production center for Tesla that is located outside of the United States. Being one of the largest auto markets in the world, Tesla’s production in China is likely to reduce costs while boosting sales for the auto manufacturer.

Tesla
Plans On Establishing A Production House In Berlin

As
of November, CEO Elon Musk has also expressed plans of establishing a
production house in Berlin. In light of the rising demand for Tesla’s electric
vehicles across the globe, the company is focusing on expanding its production
to other regions of the world. Add that to another announcement by the
manufacturer that it intends
to enter the pickup trucks’ market in the upcoming year and compete
directly against the Detroit’s big three, it is evident that Tesla aims at
keeping its performance in the upcoming years.

Following
the Q3 earnings report, Musk has also informed the investors that the company’s
Model Y crossover is ahead of schedule and is expected to hit the markets by the
summer of 2020.

While
Adam Jonas of Morgan Stanley appreciated Tesla’s performance and saw the share
prices rising amidst the upcoming milestones for Tesla, in the long run, he commented,
the stock is destined to drop back to the mid $200 level.