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Last week, in a research note badessing the links between the automotive and technology industries, Morgan Stanley's chief automotive badyst, Adam Jonas, said Tesla is "fundamentally overvalued" but "strategically undervalued."
For Jonas, a long-time Tesla bull who recently lowered his expectations, it was an interesting angle (in all fairness, Jonas was never a Tesla mega-bull), he constantly tempered his enthusiasm for the title and the society with its deep understanding of how manufacturers work).
So what does he mean exactly?
Read more: 5 reasons why Tesla is probably about to bounce
It is not that complicated. He thinks that Tesla's investors have bet too much on the value of the company, knowing that it's not clear whether Tesla has a sustainable and lasting demand for its vehicles. This is cautious because the electric vehicle market remains tiny, but it should be noted that even though the US auto market has reached a plateau for its annual sales, Tesla has recorded quarterly percentage gains at three digits, year after year.
A strategic pivot towards electrification
Meanwhile, it seems that the entire automotive sector is turning towards electrification, mainly because of the need to balance the growing sales of pickup trucks and SUVs and the impending demands of the industry. government in reducing fuel consumption and fuel economy. The latter is determined by the entire fleet of car manufacturers. Electric vehicles are therefore a good way to comply with the rules because they produce no exhaust emissions and do not burn gas.
The global transportation market is worth billions of dollars. Investors therefore have compelling reasons to study this opportunity and work to position themselves to maximize their future earnings. At present, the production of electric vehicles of most major automakers is exceptionally modest. Tesla, with its 100% 100% electric fleet, is the best way in the short term to spend money on the growth of electric vehicles.
Quite simply, Tesla shares are a bet on a larger market for electric vehicles in a decade or two. Tesla may not even be there, but if investors want to play the future, CEO Elon Musk's automaker is the only game in town.
That's what Jonas means by "strategically undervalued". Tesla actually holds the monopoly of high-end 100% electric cars, which means that its shares should be worth much, much more, if they represent a right to profits and future cash flows. To underestimate his case is obvious: since its IPO in 2010, Tesla shares have yielded nearly 800% and sometimes more than 1,000%.
Read more: It's been 100 years since we saw someone like Elon Musk – here's why it's so disorienting
Tesla has already been spectacularly undervalued as a strategic investment
According to this badysis, Tesla was strategically spectacular – historically so undervalued that early investors beat the S & P by 600% or more, depending on when they bought shares or not, after peaking.
Jonah's apparently contradictory hold is therefore perfect, but it is also an example of what F. Scott Fitzgerald meant when he wrote in 1936: "The test of first-rate intelligence is the ability to keep mind two opposing ideas, at the same time and always retain the ability to function. "
In other words, Tesla is terrible in the short term but extraordinary in the long run. And not explicitly for reasons that short-term investors could support. The transportation market of tomorrow, ideally, therefore structurally resembles today's transportation market, with many companies competing against each other. We are not there yet, but if you think there is money to be gained for an electrical future, then Tesla is the best way to attack that opportunity at the moment. Current time.
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