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Morgan Stanley, Tencent, and Jim Cramer get behind Tesla
Posted on March 29, 2017 by Matt Pressman
Tesla stock [NASDAQ: TSLA] has been on a tear. According to Electrek, "Tesla (TSLA) is now more valuable than Ford... It is sure to create a debate in the auto industry and on Wall Street, but ultimately it doesn’t really matter since Tesla is not really just an automotive company anymore." Sure, we've argued that Tesla should really be valued as a tech company. And we've even questioned if Tesla is undervalued based on Intel's recent $15 Billion purchase of Mobileye. Regardless, others are expressing confidence in Tesla for a myriad of reasons. Let's take a look.
Above: Tesla Model S (Instagram: autos_design)
Automotive analyst Adam Jonas at Morgan Stanley says "superhuman" safety will turn out to be a key advantage for Tesla moving forward: "We think the Model 3 will feature hardware and software that provide a level of active safety that could significantly lead all other cars on sale today and could, if the company achieves its goal, be an order of magnitude (i.e. 10x) safer than the average car on the road... According to nearly every OEM we talk to, safety is the number 1 determinant of car purchases. Look for safety to be the 'ah-hah!' moment for this car due to launch this year."
Above: Adam Jonas at Morgan Stanley discusses the significant safety advantages of Tesla vehicles (Youtube: CNBC)
And yesterday Bloomberg reported, "Tesla Inc. got a vote of confidence from Chinese Internet giant Tencent Holdings Ltd., whose purchase of a 5 percent stake boosts Elon Musk’s ambitions to get his mass-market Model 3 electric sedan to buyers this year. Tencent paid about $1.8 billion for 8.17 million shares... [this] makes Tencent, the Shenzhen-based owner of the WeChat messaging app, Tesla’s fifth-largest shareholder." Tencent said in a statement that Tesla's, "Elon Musk is the archetype for entrepreneurship, combining vision, ambition, and execution." In turn, Musk tweeted: "Glad to have Tencent as an investor and advisor to Tesla."
Above: Tencent's stake puts it into the the top five holders of Tesla stock along with T. Rowe Price, Baillie Gifford, FMR [Fidelity], and Elon Musk (Source: Bloomberg)
When asked over Twitter how many Model 3 orders are from China, he replied: "Very few. We have yet to do a China (or Europe) launch of Model 3." That said, it's reported that, "Tesla’s revenue from China last year tripled to more than $1 billion, indicating better traction in the market Musk has predicted could eventually become the company’s biggest... [and] China accounted for more than 15 percent of Tesla’s more than $7 billion of total revenue last year." Joseph Fath, a fund manager at T. Rowe Price explained: "Having Tencent as a partner helps position Tesla to launch the Model 3 in China... Tencent is one of the three superpowers in China along with Baidu and Alibaba, and they clearly have a lot of backing from the government."
Above: Tencent's Tesla investment is being well-received by Wall Street (Image: South China Morning Post)
With ~400,00 Tesla Model 3 pre-orders, many bears and naysayers on Wall Street have also expressed concern over the capital cushion needed to fund the enormous Model 3 production ramp. However, the $1.8 Billion Tencent investment has even caused longtime Tesla doubter, Jim Cramer, to proclaim that: "The Tesla bear story is concluded. If you were in it, if you were shorting it, because you thought they were going to run out of money? That's over. You'd better come up with another reason."