The risk of Tesla shares is not owning them

Racing ahead: A Tesla charges at a station in Kansas. The Elon Musk-led company, which is the current global market leader in electric vehicles, has reported strong delivery numbers for the first quarter, even as carmakers struggle with a chip shortage. ─ AP

NEW YORK: Tesla Inc can disproportionately benefit from the United States infrastructure package, and investors in the auto sector risk losing out if they don’t own the stock, Morgan Stanley said.

The Biden administration proposes allocating US$174bil (RM719bil) to develop the country’s electric-vehicle (EV) ecosystem, which could enhance Tesla’s advantage over legacy car companies and even some new entrants, analyst Adam Jonas wrote in a note.

However, he warned that the development may happen in a volatile fashion, bringing in some near-term uncertainties that might differ from year to year.

“It will likely be complicated by a labyrinth of national and local laws that will present advantages and disadvantages to various automakers, depending on the year that you choose to analyse, ” Jonas said.

Yet over the long term, “auto investors face greater risk not owning Tesla shares in their portfolio than owning Tesla shares in their portfolio”.

The Elon Musk-led company, which is indisputably the current global market leader in EVs, reported surprisingly strong delivery numbers for the first quarter earlier this week, even as most carmakers are struggling with a chip shortage that has forced production halts.

Despite that, Tesla shares have been stuck in a rut over the past month and are down about 5% this year. The stock rose 743% last year.

The bill, which includes purchase incentives, development of charging infrastructure and grid enhancements, would be good for Tesla, which has a higher volume of EV products in the pipeline than most manufacturers, according to Jonas.

Morgan Stanley has a buy-equivalent rating on Tesla and a price target of US$880.

The average analysts’ target on the stock is US$651, with 17 buy recommendations, 13 holds and 12 sells.

Tesla shares closed down 3% at US$670.97 Wednesday, their biggest drop since March 26. Tesla’s current products include electric cars, battery energy storage from home to grid scale, solar panels and solar roof tiles, as well as other related products and services. ─ Bloomberg