A Wall Street analyst is projecting that the electric vehicle (EV) sector will likely face short-term headwinds due to possible policy changes but foresees industry giant Tesla (NASDAQ: TSLA) remaining resilient.
This projection comes as Tesla seeks to claim the $400 resistance level. By press time, the stock was trading at $389.79, closing the latest trading session up 0.15%. In pre-market trading on December 10, the TSLA is up 0.84%, trading at $393.
Now, Morgan Stanley’s (NYSE: MS) Adam Jonas has raised Tesla’s price target to $400 from $310, maintaining an ‘Overweight’ rating.
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Jonas highlighted that while possible policy changes present near-term challenges, especially for U.S. sales, Tesla’s leadership in autonomous technology remains critical.
“Policy changes present near-term headwinds to US EV sales but must not cede autonomous leadership to geopolitical rivals. We see US SAAR >16mm supported by lower rates but higher competition, with tariff hikes an inflationary wild-card. Prefer dealers to suppliers and reiterate TSLA as Top Pick,” the analyst noted.
Impact of U.S. election on EV space
According to the analyst, the recent election outcome has extended the trend favoring internal combustion engine (ICE) vehicles, but he advised investors to watch for opportunities in the EV ecosystem in the second half of 2025.
“The US election result has extended the ‘ICE is Nice’ trade for a bit longer but keep on the lookout for hidden value in the EV ecosystem into the 2H. We recommend investors stay nimble and selective given the volatility of policy outcomes,” Jonas said.
Additionally, ahead of Donald Trump’s resumption of office in January 2025, Morgan Stanley refreshed its forecasts and outlined key themes affecting the industry. These include evolving EV incentives, tariff onshoring efforts, China’s export strategies, and the growing focus on autonomous vehicles.
Of interest, other Wall Street analysts, such as Wedbush Securities’ Dan Ives, maintainTesla is likely to thrive under the Trump administration despite indications of plans to repeal the federal EV tax. According to Ives, Tesla thrives thanks to its dominant market position.
At the same time, Tesla expects the new administration to prioritize autonomous driving technology. In this case, CEO Elon Musk is pushing for autonomous technology regulation at the federal level instead of the state level.
Notably, after unveiling glimpses of its Full Self-Driving technology in October, Tesla faced criticism for not offering a clear outlook, with investors expressing caution.
As reported by Finbold, brokerage firm Stifel raised Tesla’s share price target to $411 from $287 with a ‘Buy’ rating. The revision was based on the EV giant supposedly showcasing a clearer path toward achieving FSD. The firm also noted that Musk’s close ties with Trump might help in the rollout of more favorable regulations.
Still, for the coming year outlook, Deutsche Bank also raised Tesla’s price target from $295 to $370, calling the company a ‘key idea for 2025.’
Tesla’s FSD and AI valuation concern
Interestingly, although some analysts are bullish on Tesla due to FSD and artificial intelligence (AI), another section of Wall Street maintains that the company has yet to achieve tangible growth in these areas. Therefore, based on such a scenario, it might be premature to value the stock.
Specifically, UBS analyst Joseph Spak questioned the market’s $1 trillion valuation of Tesla’s AI projects, noting that the firm’s auto and energy businesses are worth about $52 per share, with the remaining value tied to speculative expectations.
Nevertheless, Spak raised Tesla’s price target to $226 from $197, maintaining a ‘Sell’ rating.
In conclusion, while analysts are divided on Tesla’s future, its leadership in electric vehicles and possibly autonomous driving keeps it a strong market contender. Despite short-term challenges and differing opinions on its valuation, Tesla’s performance in 2025 will depend on its ability to execute key initiatives, especially in FSD.
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