Gary Zhou 
Key Takeaways
- Tesla gets a price target increase from Morgan Stanley, now set at $425.
- Analyst Andrew Percoco takes over coverage, changing rating from ‘Overweight’ to ‘Equal Weight’.
- Caution expressed over a “choppy trading environment” for TSLA shares in the next 12 months.
- Percoco values the Optimus project at approximately $60 per share.
- Full Self-Driving (FSD) seen as Tesla’s key competitive advantage and a “crown jewel” of its auto business.
- Bull case estimates Tesla shares could reach $860, while the bear case sees them dropping to $145.
In a recent update from Wall Street, Tesla’s price target received a noteworthy boost, signaling shifts in investor perspectives and potential challenges on the horizon. Morgan Stanley’s new analysis brings fresh insights to Tesla’s dynamic position in the market, especially with analyst Andrew Percoco stepping in to share his nuanced understanding of the electric vehicle giant.
Morgan Stanley’s Price Target Adjustment: A Shift in Perspective
Morgan Stanley, a leading global financial services firm, recently revised Tesla’s price target from $410 to $425. This adjustment reflects a broader reevaluation of the company, spearheaded by analyst Andrew Percoco, who has taken over from Adam Jonas. Jonas, previously the firm’s leading voice on Tesla, has shifted his focus to stocks related to embodied AI.
From Overweight to Equal Weight
With Percoco at the helm, Morgan Stanley has changed Tesla’s stock rating from ‘Overweight’ to ‘Equal Weight.’ This move suggests a more conservative approach, considering the intricacies of Tesla’s valuation. Percoco’s strategy includes a recognition that high expectations could lead to volatility, a factor that warrants investor caution over the next year.
The Choppy Waters of Tesla’s Trading Environment
Tesla, despite its pioneering status in electric vehicles, renewable energy, and AI, faces a potentially turbulent trading environment in the coming months. Morgan Stanley anticipates a “choppy” year for Tesla shares, suggesting that high expectations may bring the stock closer to its fair valuation. This outlook indicates potential downsides to current estimates, with many of the catalysts for non-auto businesses already priced in at current levels.
Evaluating Projects: The Value of Optimus
Percoco has introduced a new method of assessing the value of Tesla’s individual projects. The Optimus project, a significant venture for Tesla, is valued at around $60 per share according to Percoco’s analysis. This project is pivotal in Tesla’s strategy, potentially impacting its overall valuation in the market.
Full Self-Driving (FSD): Tesla’s Crown Jewel
Tesla’s Full Self-Driving (FSD) technology remains a key component of its competitive edge. Morgan Stanley identifies FSD as a transformative feature that positions Tesla ahead of both electric and traditional automotive competitors. As Tesla continues to enhance its FSD platform with more advanced levels of autonomy, it sets the stage for a potentially revolutionary shift in personal transportation.
Bull and Bear Cases: The Financial Pendulum
Tesla’s financial outlook hinges on two divergent scenarios according to Morgan Stanley.
- Bull Case: Should Tesla adeptly navigate the EV market downturn while expanding its Robotaxi fleet, executing unsupervised FSD, and scaling Optimus, the company could see its stock price soar to $860 per share within the next 12 months.
- Bear Case: On the flip side, increased competition, margin pressure, and regulatory challenges could drive Tesla’s stock down to $145 per share. This scenario assumes minimal growth in Tesla’s robotaxi fleet and challenges in maintaining market share and margin profiles across its business lines.
Navigating Tesla’s Future: What Lies Ahead?
As Tesla stands at the precipice of another transformative year, several key questions emerge:
- What is the new price target for Tesla shares?With a revised price target of $425, investors have new benchmarks to consider as they assess Tesla’s market viability and growth potential.
- How does Andrew Percoco’s analysis differ from Adam Jonas’s?Percoco brings a fresh perspective, focusing on individual project valuations and offering a more conservative ‘Equal Weight’ rating, contrasting with Jonas’s prior bullish stance.
- What are the potential risks facing Tesla in the next year?The main risks encompass a volatile trading environment, heightened competition, and challenges in scaling new technologies like FSD and the robotaxi fleet.
