Undoubtedly, one of the biggest Cinderella stories of the last couple years in the stock market has been Tesla (NASDAQ:TLSA). With huge gains, new products, and a whole new mystique, the company that started the year in the sub-$100 doldrums rocketed to success, gaining at one point better than six times the share price it started at in the beginning of 2020. Now, with new reports emerging and a shift in attitude from one major analyst, Tesla is gaining even more new ground.
Haven't Seen This One Since 2017
The big news of the day for Tesla is that the company is now considered “overweight” by Morgan Stanley, a stance the analyst hasn't actually taken since 2017. Reports noted that, now, Morgan Stanley considers Tesla on the verge of a “profound model shift,” which sees Tesla going from primarily an electric vehicle firm and more a software and services vendor.
Certainly, Tesla will continue to sell vehicles, but as Morgan Stanley analyst Adam Jonas points out, that's just the start of Tesla's ability to generate revenue. Cars are what get customers in the door; after that, there are a range of options, including network services, insurance options, and of course, the growing “internet of cars” concept that opens up further potential. Then, start addressing the notion of Tesla as a battery powerhouse and an energy storage provider—we're already seeing that with things like Tesla's Powerwall battery—and Tesla has the opportunity to be so much more than a carmaker.
The Mysterious Update and Other Mysteries
Jonas' points about Tesla being a lot more than just a car seller bear out nicely given recent word about Tesla's near-term future plans. The upcoming software update, known as v11, is set to hit 'during the holidays”, which could be pretty much any time between now and the end of the year. The new update will come with not only several previously-requested features, but also a set of features that will come as a “surprise” to users, according to word from CEO Elon Musk.
Perhaps a bigger mystery, however, is why Tesla is planning to pull the Model 3 out of circulation a second time. The Model 3, which sold for $35,000, was Tesla's lowest-priced model, seen by many as the key entry point for Tesla vehicles. Recent reports point to the possibility of a whole new Tesla car, one that will actually sell for around $25,000 and feature the new “tabless” battery cell technology.
Collateral Gains and Growing Diversification
While the shift in tone from Morgan Stanley is a big step forward for Tesla, it's not the only thing that's giving the company extra gains on the strength of its stock performance. The company recently achieved a long-desired milestone, which will allow it to join the S&P 500 starting December 21. Tesla's ambitions to join the S&P 500 go back to at least the start of this year. That should prove a short-term gain for Tesla as institutional investors and funds start moving cash behind Tesla as a result of its inclusion.
Meanwhile, our latest research finds that Tesla may be a “trending stock,” but it's still taken with some skepticism. The company currently has a “hold” rating, though its dynamics are constantly changing. Currently, the company has 11 “sell” ratings, 12 “hold” ratings, 10 “buy” ratings and one “strong buy” rating for a consensus of “hold.” That's very different from even 30 days ago, when the company had 10 “sell” ratings, 15 “hold” ratings, eight “buy” and no “strong buy” ratings. The price target, however, has been on an upward tear, going from $223.86 30 days ago to $262.07 today.
The biggest point in favor of buying in on Tesla these days is its increasing level of diversification. Previously, Tesla was a carmaker with ambitions to push into power storage. A fairly natural course path, but not exactly one that could spark investor interest in the long term. However, the addition of software and services turns Tesla into a much different proposition, especially now that its power storage concept is really getting up and running.
It's good to have one very popular product. It's even better to have several popular products, so that if that first one wanes, the others can pick up the slack. Tesla is rapidly moving into that space, going from being the first-mover in electric vehicles to being the leader in supplying and powering them. That's good news for the company, and even better news for potential investors.
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