News report says Tesla registrations nearly halved in California in the fourth quarter
Shares of Tesla (TSLA) are under pressure on Thursday after Morgan Stanley analyst Adam Jonas downgraded shares to Underweight, a sell-equivalent rating, following a 105% rally over the last four months and as he believes risks to Tesla's long-term Chinese business may not be fully appreciated.
SELL TESLA: In a research note to investors, Morgan Stanley's Jonas downgraded Tesla to Underweight from Equal Weight, while raising his price target on the shares to $360 from $250. The analyst sees an unfavorable risk/reward at current valuation levels following the stock's recent rally. Further, he believes risks to Tesla's long-term Chinese business may not be fully appreciated by the market as he continues to harbor concerns whether an auto business commercializing advanced, dual-purpose technology in economically sensitive industries could be a long-term winner in the Chinese market.
Jonas pointed out that four factors have driven Tesla's share price up 105% over the last four months - namely stronger than expected global demand for its vehicles; China announcements that show the company's expansion into the world's largest electric vehicle market; supportive incentive developments; and positive sentiment around its product expansion. While admitting that the near-term momentum and sentiment around the stock is "very strong," the analyst questioned the "sustainability of the momentum." Jonas increased his expectations for Tesla's core auto business, but decreased his expectations for the mobility business.
REGISTRATIONS NEARLY HALVED IN CALIFORNIA: Tesla's overall vehicle registrations nearly halved in California during the fourth quarter, Reuters' Akanksha Rana wrote, citing a Dominion Cross-Sell report, which collates data from state motor vehicle records. The report showed registrations in California plunged 46.5% to 13,584 in the quarter ended December 2019, from 25,402 in the same period a year earlier. Model 3 registrations, which accounted for about three-fourth of the total, halved to 10,694. The massive drop comes as tax credit for Tesla buyers ended in 2019, the author added.
PRICE ACTION: In morning trading, shares of Tesla have dropped over 3% to $500.92.