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MORGAN STANLEY: New Tesla investors are making 4 questionable bets about the company and rivals like Amazon and Apple (TSLA)

  • Tesla's stock price has jumped from $373 at the end of March 18 to $1,575 when markets opened on Wednesday.
  • Morgan Stanley said in a research note that those who have bought Tesla shares for $1,500 or more are making four questionable bets about Tesla and its competitive and economic environments.
  • Those investors are banking on relatively peaceful trade relations between the US and China, weak competition from other automakers and tech companies, and Tesla's automated-driving technology bringing in a large amount of revenue in the coming years.
  • Are you a current or former Tesla employee? Do you have an opinion about what it's like to work there? Contact this reporter at mmatousek@businessinsider.com, on Signal at 646-768-4712, or via his encrypted email address mmatousek@protonmail.com.
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Tesla's stock price has been on a tear this year, rising from $373 at the end of March 18 to $1,575 when markets opened on Wednesday.

But investors who have paid $1,500 or more for Tesla shares are making four questionable assumptions about Tesla, its rivals, and macroeconomic conditions, Morgan Stanley said in a research note published on Monday.

"In our view, buying the stock at these levels one must believe: (a) that US-China relations will remain copacetic on trade/IP long term, (b) the legacy [automakers] will fail to produce a competitive EV [electric vehicle] product, (c) the big tech platforms [Amazon, Alphabet, Apple, etc.] will either not try to develop compelling EV systems, not achieve success, or, if successful, use Tesla technology in its offering, (d) that autonomous driving can produce substantial service revenue ($50 to $100 ARPU [average revenue per unit]) over the next three to five or five to 10 years," the bank said.

Morgan Stanley raised doubts about the prospect of those four scenarios playing out simultaneously, saying, "We remain concerned about Sino-US relations with respect to autos. We believe legacy players will spend $400 billion to $500 billion on EVs over the next five years. We expect big tech (established and clean-sheet startups) to enter transport as a significant competitive force in EVs. And we are extremely cautious on the pace of adoption of full autonomy as a percentage of miles traveled over the next decade (<0.3% by 2030)."

Tesla did not immediately respond to a request for comment.

Though Tesla shares have been more expensive than those of General Motors, Ford, and Fiat Chrysler for years, the electric-car maker reached a new milestone earlier this month when its market capitalization surpassed Toyota's, making Tesla the most valuable automaker, based on the value of shares held by investors.

Skyrocketing investor confidence has come as Tesla has posted three consecutive profitable quarters for the first time in its history, begun production of its Model Y SUV months ahead of schedule, and surpassed analysts' expectations for vehicle deliveries in the second quarter of this year, though Morgan Stanley expressed confusion regarding the significant number of Tesla shares that have been traded in recent weeks.

"We have made efforts to identify the source of such extraordinary levels of volume (long-only short covering, retail, index, quant, ESG options, intra-exchange volume), but admittedly, it is not entirely clear to us where the bulk of the volume is originating," the bank said in its Monday note.

Are you a current or former Tesla employee? Do you have an opinion about what it's like to work there? Contact this reporter at mmatousek@businessinsider.com, on Signal at 646-768-4712, or via his encrypted email address mmatousek@protonmail.com.

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