Morgan Stanley Adjusts Tesla Price Target Amidst Shifting Analyst Coverage

Morgan Stanley has updated its outlook on Tesla, with new analyst Andrew Percoco taking over coverage and adjusting the price target. While acknowledging Tesla's leadership in electric vehicles, manufacturing, renewable energy, and AI, the firm expresses caution regarding the stock's trading environment over the next year due to high expectations.

Key Takeaways

• Morgan Stanley analyst Andrew Percoco has taken over Tesla coverage, raising the price target from $410 to $425.

• The rating has been changed from 'Overweight' to 'Equal Weight,' citing high expectations that may lead to a "choppy trading environment.

• Percoco values Tesla's Optimus robot at approximately $60 per share and highlights Full Self-Driving (FSD) as a critical "crown jewel."

• The firm outlines both a bull case scenario of $860 per share and a bear case scenario of $145 per share.

Shifting Analyst Perspective

Andrew Percoco has replaced Adam Jonas as Morgan Stanley's lead analyst for Tesla. Percoco's initial move involved a slight increase in the price target to $425, while simultaneously shifting the rating to 'Equal Weight.' This adjustment reflects a belief that while Tesla is a leader across multiple sectors, current high expectations for its non-automotive ventures may already be factored into its stock price, potentially leading to volatility in the coming 12 months.

Valuing Tesla's Future Technologies

Percoco's analysis places significant value on Tesla's forward-looking projects. He estimates the Optimus humanoid robot to be worth around $60 per share in equity value. Furthermore, Full Self-Driving (FSD) is identified as the "crown jewel" of Tesla's automotive business, with its advanced autonomous driving capabilities seen as a substantial and lasting competitive advantage. The potential for FSD to revolutionize personal driving experiences is emphasized, with questions remaining about whether competitors can match Tesla's progress.

Bull and Bear Case Scenarios

Morgan Stanley has presented distinct scenarios for Tesla's stock performance. The bull case suggests a potential price of $860 per share within the next year, contingent on Tesla navigating the current EV downturn, successfully scaling its Robotaxi service, achieving unsupervised FSD, and expanding the Optimus production. Conversely, the bear case posits a price of $145 per share, assuming increased competition, margin pressures across all business lines, no value attributed to humanoid robots, slower growth for the Robotaxi fleet due to regulatory hurdles for vision-only systems, and a reduced market share and margin profile for the auto and energy sectors.

Currently, Tesla shares are trading around the $441 mark.