Tesla's Record High Has Little To Do With Its Cars

Tesla just got another upgrade while one of its car models just got a downgrade.
Jennifer ChanNov 19,2020,19:14

Outspoken boxing promoter Don King used to say "Only in America!" when he spoke of both the fights he successfully promoted as well his knack for promoting himself.

When it comes to Tesla's stock price, which hit a high on the same day that two of its electric cars have been dropped from Consumer Reports' recommendations over a lack of reliability, CEO Elon Musk should be chanting "Only in America...in 2020." A strange year for stocks and just about everything else, indeed.

Both the company's Model S sedan and Model Y crossover SUV are no longer “recommended” by Consumer Reports as announced on Thursday. The Model 3 electric sedan is now the only Tesla car Consumer Reports recommends to consumers. Yet its stock is on fire. Why?

First, the stock caught an upgrade when Tesla announced it will finally join the S&P index, making this company a blue-chip staple of the American equity markets. Morgan Stanley analyst Adam Jonas upgraded the stock not because of its cars, however, but because of what he sees as a "profound business [model] shift." Jonas changed his Tesla (Nasdaq: TSLA) rating to a Buy from a Hold, moving his price target to $540 from $360. He thinks the stock might even go above $1000 per share.

For Jonas, it is all about the software, not the cars. The separately sold full self-driving software Jonas writes, "To only value Tesla on car sales alone ignores the multiple businesses embedded within the company.”

In addition to software, infotainment packages, and vehicle performance upgrades, Tesla also has its fingers in many market pies with plans to enter even more. From the insurance market to the ridesharing market to the solar and stationary battery storage market--Tesla is an outlier in the automobile industry for being valued higher because of its other businesses outside of selling cars.

Just back in June, Jonas put a :sell" rating on Tesla, with a measly $120 price target.

Only in America in 20), indeed.

Topics:Tesla, EV, Elon Musk, Nio, Xpeng,