Tesla Motors Inc (NASDAQ:TSLA) could be having all the flair in the business, but JP Morgan’s still considers it inferior stock compared to both General Motors Company (NYSE:GM) and Ford Motor Company (NYSE:F). This is partly because the risks associated with the stock aren’t known to investors thus saying they still remain cautious of it.
In a JP Morgan’s stock analysis of the leading automakers, the long term demand for electric cars isn’t certain and metal prices are likely to decide how Tesla Motors Inc (NASDAQ:TSLA) stock trades.
Tesla Motors Inc (NASDAQ:TSLA) has been performing well, having massive projects going on and several others in the pipeline. The stock also got a boost after announcing plans for a gigafactory to be set up in Nevada. Unlike General Motors Company (NYSE:GM) and Ford Motor Company (NYSE:F) that have a lot of legacy benefits paid to former employees, Tesla Motors Inc (NASDAQ:TSLA) doesn’t have that kind of load.
Moreover, Tesla Motors Inc (NASDAQ:TSLA), headed by entrepreneur Elon Musk, has a strong and properly functioning management system. Plus all the sudden gusto to deliver superior and nice to drive electric cars, the company seems ready for the future; in fact, it projects a more solid future than both General Motors Company (NYSE:GM) and Ford Motor Company (NYSE:F).
However, JP Morgan’s thinks otherwise!
First, JP Morgan’s says that the future stability in terms of demand for electric cars is still uncertain. That means any one investing heavily on it is taking a huge risk. Even though there have been wide awareness campaigns by several environmental conservation groups and governments agencies on the importance of electric and hybrid cars, the future of such cars still remain bleak.
According to analyst Ryan Brinkman at J.P. Morgan, the uncertain long-term demand for electric vehicles and the dynamic prices of aluminum, steel, nickel, and copper, makes them cautious of the stock. Brinkman therefore maintains neutral rating on the stock. He has however raised his December 2015 price from $170 to $190.
Brinkman was more positive about General Motors Company (NYSE:GM), saying that the company’s valuation is still very high and has a huge growth potential of up to 50%. The analyst also said that the fact that Ford is penetrating other markets has a great chance of expanding fast in terms of trade volumes, a factor that makes the stock healthy.
After JP Morgan’s released the report, Tesla Motors Inc (NASDAQ:TSLA) stock reacted, losing 2% to trade at $254.
This article has been written by Victor Ochieng.