Time for Tesla Financial Services has come – Morgan Stanley

“We think the time for a full-line Tesla finco has arrived.” – say Morgan Stanley analysts, as he maintains an Overweight rating on Tesla (NASDAQ:) with $200 Price Target.

In their latest note on the EV giant, analysts argue that the company has historically sold the majority of cars “for cash or minimal leasing,” but as it looks to continue expanding and ‘acquire’ the next 5-10 million clients, “customers require new solutions in a market where 90% are bought on monthly payment.”

“We think investors should prepare for Tesla to begin building a large full-scale captive financing subsidiary as the market matures, to facilitate the potential IRA leasing rules and several other factors,” – the analysts continue, noting that “Tesla may be leaving sales on the table” by not offering competitive financing options.

They also argue that Tesla already has everything it takes to become a successful financing company – with its “strong balance sheet and cash flow ‘ballast’ to support a finco, coupled with strong potential banking / ABS partnership prospects and an expansive downstream network,” the company is “well positioned to reap the benefits of a well-managed, conservative profit generator.”

“Tesla Finco seems to us a logical next opportunity to support further top line growth” – conclude Morgan Stanley analysts, as they reiterate an Overweight rating on the shares with $200 Price Target.

Shares of TSLA closed at $249.83 yesterday, and are up over 131% YTD.