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Investing.com -- Morgan Stanley has identified Geely Automobile Holdings (OTC:GELYF) as a “research tactical idea” in a note Wednesday, seeing near-term upside potential in the stock.
The firm expects the share price to rise in absolute terms over the next 15 days. The positive outlook follows Geely Group’s recent revision of its full-year volume guidance, which was raised by 11% to 3 million units from 2.71 million units.
Morgan Stanley (NYSE:MS) highlighted that this upgrade is “largely from Geely Galaxy,” which “accounted for 39% of total sales volume and contributed ~85% of the year-over-year increment year-to-date.”
The analysts emphasized the strength of the Geely Galaxy model pipeline, noting that models A7 and M9 “will fuel stronger sales momentum into the second half.”
Morgan Stanley estimates a “70% to 80% (or ‘very likely’) probability” for this scenario, signaling a strong conviction in the company’s near-term growth prospects.
The firm’s valuation approach is based on a discounted cash flow model with a weighted average cost of capital of 11.2% and a terminal growth rate of 3%.
Morgan Stanley also outlined key risks to its overall outlook for the stock. Upside risks include “vehicle purchasing stimulus extension,” “more meaningful reduction in losses for its NEV businesses, via scale benefits,” and “stronger-than-expected profitability, driven by sales of its key products.”
Downside risks include “a more notable than expected slowdown in domestic vehicle demand,” “expanding losses at Geely’s NEV businesses amid price competition,” and “a slowdown in overseas sales due to competition and protectionism.”