Morgan Stanley Warns of Tesla Stock Risk: Geopolitical Exposure a Major Concern - Essay Sample

Introduction

Morgan Stanley analysts is an investment company that has specialized in the previous research and analysis of the stock market as well as the companies, industries, and markets in the vast world economies. On the 25th, the company casts its concerns about the tesla company as well as how the stock is anticipated to fall due to the increased debt load of the company. The analysis company majorly inclined on the geopolitical exposure-related with Tesla products, especially its acceptance in the Chinese markets. The company opened the markets at 197.76 and closed at 205.08 hence experiencing a 10% gain in the stock price (Smith, 2019).

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Figure SEQ Figure \* ARABIC 2: Tesla company stock history reports for June 6th, 2019 source: Yahoo Finance. (2019)

Event on June 6th, 2019

On this date, the company opens at 204.44 and closes at 205.95 hence experiencing a 15% change in the share price. This was attributed to the announcement by the company chief executive Elon Musk on the offering of increased bonuses to employees throughout the manufacturing period in case they realize their set targets to meet the Asian as well as the North American Tesla markets. These signal by the company chair could have influenced a tremendous increase in sales (Lambert, 2019).

Figure SEQ Figure \* ARABIC 3: Tesla Company stock history for July 25th, 2019 source: Yahoo Finance. (2019)

Event on July 25th, 2019

The company opens at 223.5 at the share price and closes at 228.82 hence experiencing a 10.5 % decrease in the share price during that day. This is accrued to the fact that the Tesla company had lost the chief technology officer on that day which also led to a drop in the sales by a strict 14%. The company chief technology officer JB Straubel had previous jobs in the companies such as Amazon was to be moved to an advisory role rather than an active post in the company (Ari Levy, 2019).

The share price is described as the price of a single share in the companies' saleable units of value which are the stocks that enable the particular company to raise income for the operations from the stock market. In the case, the tesla company is a listed company in the NASDAQ, which is the national association of securities exchange in the united states and is by far the largest securities exchange market. On the other hand, market efficiency refers to the extent to which every information available has been factored in the prices of the stocks; hence there is no share price or stock values that have been undervalued or overvalued thus there is no instance of beating the market. Since the interplay of information influences the market performance, it is critical to note that market efficiency reflects all the information regarding the values of all the assets and securities in trade. Information that influences the market efficiency involves the changes made to the company or any analysis by a principal analyst of the market that may cause the market to shift or change. A highly efficient market, therefore, incorporates all the changes in the information to their share price.

On May 21st, Morgan Stanley analysts cast their bullish forecast on how the Tesla stock was set to decline due to the demand of Tesla products in the Chinese markets and the increased debt loads as well as the geopolitical exposure. The analysts went on to suggest that the moment Tesla's share price declines, they will strategically move to seek assistance from their industrial or financial partners since they have to keep up with their software as well as state of the art hardware technologies. This gesture by the company to possessing the best technology sets the buyers and sellers in the market into an unwarranted frenzy as they set out to contradict their opinions on the buy and sell of the Tesla stock. The decrease on this particular date was accrued due to this analysis which later influenced other analysts such as Reuters to provide news on the number of analysts who have offered opinions on the Tesla stock. It was found out that five analysts would still recommend to actively buy the Tesla stock while the nine others recommended selling the capital respectively actively. From gestures like this, it is therefore essential to note that Tesla operates on a relatively market efficient stock market.

On June 6th, 2019, Elon Musk chief executive officer announces the new offer to employees which includes bonuses to deliver vehicles to the North American markets hence an increase in sales. The company was to announce its new record sales in the quarterly deliveries with a target of 36,000 deliveries in the last quarterly as opposed to 33,000 deliveries in the current quarterly. From the employee offers, the company will boost the production and deliveries to their set target hence meeting their stated demand for electric vehicles in North America. Electrek, a United States-based website, informs that the company may not achieve their stated goals due to the revenues anticipated from the deliveries, but they may boost their general revenue margin. The company share price may not, therefore, rise on the long-term, but the quarterly may be one of the most significant growth quarterlies for the company. This information by the website influenced the players of the stock market to purchase stock; hence, the fore mentioned increase was recorded. This shows that information that is factored in the share price may influence the share price and value; thus, tesla company operates on a relatively efficient market.

On July 25th, 2019, Tesla company faces a tremendous loss in the company due to the departure of the company chief technology officer (CTO) JB Straubel who stepped down from his executive ranks into an advisory role in the company. The stock on this date plunged a whopping 13% which is one of the most significant recorded declines in the share price of the company since the previous year in September. The former CTO was accrued to overseeing power electronics, motors, and software, firmware as well as controls. His work in the company asserted to boost the companies profits by improving on the Tesla models through outright production in the existing factories. The exit of the CTO may have cost the company the decline in the share price, and the information about his leaving influenced the market. This signifies how the changes in the company leadership and information about this change affect market efficiency.

References

Ari Levy, L. (2019). Tesla suffers its worst day of the year after brutal earnings report and loss of technology chief. Retrieved September 11th 2019, from https://www.cnbc.com/2019/07/25/tesla-is-having-worst-day-of-2019-after-earnings-and-loss-of-cto.html

Lambert, F. (2019). Tesla sales reach new high, offering bonuses to deliver this month - leaked info - Electrek. Retrieved September 11th 2019, from https://electrek.co/2019/06/05/tesla-sales-high-bonuses-leak/

Smith, E. (2019). Tesla shares could drop to $10 in a worst-case scenario, Morgan Stanley says. Retrieved September 11th 2019, from https://www.cnbc.com/2019/05/21/morgan-stanley-tesla-shares-could-drop-to-10-in-worst-case-scenario.html

Yahoo Finance. (2019). Retrieved September 11th 2019