Is Tesla Motors Inc. the Most Important Car Company in the World?

In 2011, when Tesla Motors (NASDAQ: TSLA  ) was trading at around $26, Morgan Stanley analyst Adam Jonas put a $70 price target on the electric-car maker. The absurd target shocked the Street. Fast-forward a few years later: Jonas made a similar dramatic change to his target, raising it from $153 to $320 earlier this year.

And now Jonas is speaking up again. While he isn't boosting his price target this time, his latest note to investors regarding Elon Musk's Tesla Motors is, once again, unashamedly optimistic. But considering the stock's 4% jump Monday, at the time of this writing, the market doesn't seem to think he is crazy.

Model S. Image source: Tesla Motors.

Jonas' latest thoughts on Tesla
With glimpses of the report shared by the LA Times, Jonas is still a Tesla believer:

Not even two years after the delivery of the first Model S, Tesla Motors has transformed from fledgling start-up to arguably the most important car company in the world. We are not joking.

How so? Jonas points to several areas where Tesla is becoming increasingly important.

1. Automotive suppliers. Suppliers are considering building dedicated lines and facilities for Tesla alone, according to Jonas (citing a senior executive at a major auto supplier). The supplier recounted how Tesla operates uniquely "in terms of electrification, connected cars and autonomous driving."

2. Competitors. General Motors has a team dedicated solely to studying Tesla and developing long-range electric vehicles that will hopefully be just as successful as the Model S, Jonas notes. And a BMW engineer explained to Jonas that Tesla has "helped reinvigorate the spirit of automobile innovation," he says.

3. The U.S. economy. Tesla's $5 billion Gigafactory project to build the world's largest factory for lithium-ion battery production is the beginning of an influx of new jobs for the U.S. The Gigafactory alone will not only create thousands of jobs, but Tesla's rise to prominence over the next seven years could create as many as 100,000 jobs from indirect support, Jonas believes.

Tesla's Fremont factory. Image source: Tesla Motors.

And perhaps more interesting, Jonas notes that Tesla is the "most American made car on the road." Jonas asserts that Tesla's vehicles have about "90% U.S. content," beating out the Ford F-150 and the Chevy Silverado.

But $320?
With Tesla stock trading at about $238 today, and up about 140% in the past 12 months, it's difficult to imagine the stock reaching $320 in the near future.

How does Jonas arrive at such a bullish target? He predicts Tesla will achieve enough scale to capture slightly less than 1% of the global auto market by 2028.

While this prediction for market share seems reasonable, investors should keep in mind the enormous risk associated with investing in stocks with so much of the stock price based on extremely forward-looking assumptions.

Warren Buffett's worst auto nightmare (Hint: It's not Tesla)
A major technological shift is happening in the automotive industry. Most people are skeptical about its impact. Warren Buffett isn't one of them. He recently called it a "real threat" to one of his favorite businesses. An executive at Ford called the technology "fantastic." The beauty for investors is that there is an easy way to invest in this megatrend. Click here to access our exclusive report on this stock.


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  • Report this Comment On June 23, 2014, at 3:30 PM, ffbj wrote:

    Well certainly it has the most stories written about it.

    I was in a Ford plant a couple times. It was dingy, dark, dirty, oily, and people just were sort of zombies, if you know what I mean. I also smelled like electrical circuits burning.

    Now look at that picture of the Tesla plant above.

    Clean, bright, neat. I think that would one way to compare the old ice plants/car companies with the modern electric car company, and not just in the physical space itself, but in the way they operate their business.

    Anyway I think the stock is being driven by traders, covering shorts, so you get these big jumps. To me a bit scary for investing too.

  • Report this Comment On June 23, 2014, at 7:46 PM, djtetsu wrote:

    Love the company, but it's good to separate out your emotions from investments. I think they will reach all these nice goals, but my main concern is TIMELINE. The model X was supposed to be out 2014 (or was it 2013)? You can just imagine Elon Musk's perfectionist nature dragging out the Giga Factory if it ever starts!

  • Report this Comment On June 24, 2014, at 8:54 PM, ffbj wrote:

    The Model X probably got moved a couple of quarters from where they originally deliveries would begin. Actually a really amazing story has been unfolding before our eyes... and pretty much they have done what they said they would do so far, albeit maybe not quite at the breakneck pace they had hoped or predicted.

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