Tesla Set To Extend Winning Streak To 14 Days, Morgan Stanley's Jonas Asks If Earnings Estimates Have Bottomed

Tesla's record winning streak continues, with the EV-maker set to post its 14th straight green session heading into the cash open on Wednesday. 

Morgan Stanley's Adam Jonas added to the euphoria, putting out a note stating that "the market wants to believe Tesla is an AI name first, an auto company second" and arguing that investors "may be again looking at ways to justify the valuation beyond the confines of a unit x price automotive/hardware model.”

Despite saying he doesn't expect a material revision upward for earnings, Jonas writes in his note that his "$390 bull case coincidentally stands near the all-time high achieved by the stock amid a broader market rally in November 2021." 

Morgan Stanley says that bull case "includes $194/share for the core auto business (assuming 10mm units by 2030 with a 22% EBITDA margin), $55/share for Tesla Energy (30% gross margin by 2030), $48/share for Network Services (25mm MAU at $120/month ARPU by 2030), $40/share for EV/Battery 3rd party supply, $37/share for Tesla Mobility/Ride Sharing and $16/share for Tesla Insurance." 

"Despite the recent rally, we are not anticipating material upside earnings revisions for Tesla consensus forecasts and still believe the prevailing pattern of events is continued price deflation driven by intensifying competition with Chinese EV players and a slowing auto consumer," Jonas writes.

"It seems the market is either looking through the potential revisions or assuming a less severe earnings downdraft than previously expected. Have we passed through the worst of Tesla’s price-cut-driven estimate reset? Is $3/share the bottom for Tesla earnings this cycle?"

From a market cap standpoint, Bloomberg noted Wednesday morning that Tesla's gains are more than 90% of Nasdaq 100 components. Looking at the technicals, the same note says this "rally has propelled its relative strength index to 88, signaling to some technical analysts that a stock may have risen too far".

"While Tesla's longest streaks coincide with double digit gains, price performance afterwards has historically been volatile on an absolute and relative basis vs. the S&P 500," Jonas added, also suggesting that after this historic run higher is over that volatility might creep back into the name.