Treat Tesla like it's a Chinese tech stock, Morgan Stanley says
The electric carmaker is likely to find itself closely tethered to the price movements of China's tech stocks because up to half of its profits come from that country, its analysts said in a Monday research note.
"We estimate Tesla generates as much as one-half of its profitability from the Chinese market, arguably making the stock a derivative of a Chinese tech stock," the team led by equity analyst Adam Jonas said.have dragged on the Chinese economy this year. This week's reading of third-quarter GDP growth of 3.9% year-on-year puts the economy on track to fall well below the Communist Party's 5.5% target for the year.in China, as businesses start fretting about a potential recession.
That could weigh further on the EV maker's stock price, which as of Monday's close has dropped 4.9% since its earnings report Wednesday. The update showed Tesla missed its revenue and delivery targets in the third quarter.Investors' fears about economic slowing have been weighing on Chinese tech stocks, and the sector-trackingTesla CEO Elon Musk pointed to an economic slowdown in China on the company's earnings call.
Tesla will likely be reliant on its sales in China until at least 2030, the Morgan Stanley team said. That leaves it exposed, if the hostilities between the US and China intensify. "The broader arc of Sino-US economic relations and the evolving geopolitical situation will continue to add volatility to Tesla shares," the bank said.
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