Morgan Stanley’s Adam Jonas thinks there is no way to quantify the value of Musk’s advisory relationship with President Donald Trump
Published By: Eunice Gettys on January 30, 2017 06:52 am EST
Since December 2016, Tesla Motors Inc (NADSAQ:TSLA) shares have surged about 40% mainly on the back of a bromance between its chief Elon Musk and President Donald Trump. While this places Tesla in a perfect position to take advantage of upcoming policies, Morgan Stanley believes that investors should not just buy the stock based on the newly formed relationship.
The partnership between the two individual seemed highly unlikely during pre-elections when Mr. Musk went on record saying that Trump is not the right person for presidency given their opposing views on global warming. However, Mr. Trump vowed during the election campaign that he would bring manufacturing jobs back to the US.
The President has seen Tesla CEO’s capability of building made-in-USA products using the American workforce as well as his visionary ideas of electrify energy and transportation industries. Thus, Mr. Musk is one of the only two CEOs of an American company that are part of both Strategic and Policy Forum and Manufacturing Job initiative.
Yet, Morgan Stanley analyst Adam Jonas, who recently upgraded Tesla to Overweight and upped his price target to $305, thinks that this doesn’t make any impact on the clean-energy company’s investment thesis. He thinks that Mr. Musk’s “advisory relationship” with the President may involve working in three key departments: Defense, Energy, and Transportation.
He further added that: “While the extent of such potential work is as yet unknown, it is likely not part of the Tesla investment case."
He explained Mr. Musk’s advisory relationship with the Trump administration is not quantifiable and he does not expect any favors to be bestowed on his company despite having the ear of Mr. Trump. However, since Tesla is “a highly visible and fast growing US jobs creator with strong emphasis on domestic in manufacturing in value-added sectors,” the analyst believes the relationship is notable.
He expects the relationship to give leverage to Mr. Musk’s companies – Tesla and SpaceX – over the long-term. In fact, Mr. Jonas believes that it would make sense to merge both the companies if Mr. Musk intends to take part in government-backed Mars mission. However, the CEOs of both companies have previously dismissed the idea.
Mr. Jonas is bullish on Tesla because of its upcoming Model 3, as he now expects the company to launch the vehicle on schedule and quickly ramp up its production.