Apple's Entrance Into EVs Creates "A New Tesla Bear Case", Morgan Stanley Warns

Just hours after Elon Musk took to Twitter to reveal to the world that Tim Cook wouldn’t take his phone calls when he was looking for a bailout, Morgan Stanley has now come out and admitted that Apple’s entrance into the self-driving market creates “a new Tesla bear case”. 

Tesla uber-bull Adam Jonas wrote in a note on Tuesday: “Apple’s potential entry into autos represents perhaps the most credible/formidable bear case for Tesla’s stock that investors have had to consider for some time.”

If “Apple were to really throw its weight around,” legacy automakers could have a hard time competing, Jonas said, according to Bloomberg.

And in true sell-side fashion – despite this “formidable” new bear case – Jonas, who has a history of “predicting” Tesla price targets within multiple-hundred-dollar ranges, maintained his $540 price target on the company (reminder, this is a $2700 pre-split price target). 

Jonas also highlighted suppliers that may win from Apple’s entrance into the industry, including Lidar suppliers Luminar Technologies Inc. and Velodyne Lidar Inc.

Recall, we also noted yesterday what other analysts on the street were saying about Apple’s entrance into the market. “Apple has ingredients to be successful in future auto industry: access to capital and talent, proven hardware design and a rich ecosystem to leverage service revenue,” Jonas had said on Monday, prior to yesterday’s note.

Tesla’s stock has looked stuck and stagnant this week after its inclusion into the S&P 500 and after we noted that Apple was throwing its hat into the self-driving car business on Monday. In addition to designing self-driving vehicles, Reuters also reported that Apple’s cars could “include its own breakthrough battery technology”.

Apple’s development project, called “Project Titan” was rumored to have been shelved after first starting in 2014. However, former Tesla executive Doug Field returned back to Apple in 2018 to work on the project before laying off 190 people from the team in 2019. But since then, “Apple has progressed enough that it now aims to build a vehicle for consumers”, Reuters noted.

The saga took another twist on Wednesday when Musk revealed on Twitter he had sought out help from Apple and that Tim Cook wouldn’t take a meeting with him. As we said yesterday, in case anybody was left wondering about whether or not Apple planned to become a Tesla competitor or not, it seems as though that narrative has been sewn. 

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