A Morgan Stanley (NYSE: MS) analyst has issued an upward revision for Tesla’s (NASDAQ: TSLA) stock price, citing the positive impact of the company’s autonomous vehicle technology and embedded artificial intelligence (AI).
This comes as Tesla’s share price faces short-term volatility. TSLA stock dropped by over 3% in pre-market trading on January 13, falling to $382. By press time, the equity traded at $385, down over 5% in the last week.
TSLA stock new target
In an investor note on January 13, the firm’s Adam Jonas increased Tesla’s share price target to $430 from $400, maintaining an ‘Overweight’ rating.
Picks for you
In the long term, Jonas foresees Tesla reaching a high price of about $800 and reiterated TSLA as Morgan Stanley’s ‘Top Pick’ for 2025.
“While autos remain important, we view embodied AI as the key driver for upside, reflected in our revised $800 bull case. We reiterate Tesla as a Top Pick,” Jonas said.
According to the expert, Morgan Stanley’s comprehensive re-architecture of its Tesla Mobility (robotaxi) model supports the bullish price estimate.
This recognizes Tesla’s unique data collection, robotics, energy storage, AI, and manufacturing advantages.
The analysis also emphasized the importance of synergies Tesla achieves through innovation across Elon Musk’s portfolio of companies, including SpaceX and xAI.
For the rest of the year, Jonas projects that 2025 will be crucial for Tesla as it expands into broader markets despite challenges in the EV sector.
“We see 2025 as a year where Tesla’s unique skillset could be further reflected in its valuation, despite well-known challenges in the FY25 EV market. Looking ahead, we expect Tesla’s total addressable market (TAM) to expand into broader domains, many of which are still not reflected in current financial models,” the analyst added.
Tesla’s headwinds
Indeed, Tesla continues to grapple with headwinds, including disappointing vehicle deliveries and competition from Chinese manufacturers such as BYD.
Wall Street analyst Gordon Johnson has already warned investors to brace for a Tesla “bloodbath” following the release of the Q4 2024 earnings report. The grim outlook surfaced after Tesla reported 495,570 deliveries for the last quarter, falling slightly short of the 504,770 deliveries projected by analysts.
Tesla’s AI valuation concerns
Jonas’s bullish outlook contrasts with UBS analyst Joseph Spak, who has urged caution regarding Tesla’s AI valuation.
In November 2024, Spak warned that the market might be overestimating AI’s future impact on the company, noting the lack of current groundbreaking products under the technology. Notably, amid these concerns, Musk noted that Tesla’s Full Self-Driving (FSD) technology heavily relies on AI.
While Morgan Stanley acknowledges that autonomous technology will be key to Tesla’s growth, the company still faces short-term challenges in this space.
For instance, as reported by Finbold, Tesla investors were rattled after the National Highway Traffic Safety Administration (NHTSA) launched a probe into 2.6 million vehicles equipped with the “Actually Smart Summon” feature, which allows drivers to move vehicles remotely via a smartphone.
Nevertheless, a segment of Wall Street experts, led by Wedbush Securities’ Dan Ives, remains optimistic.
Ives believes that under the upcoming Donald Trump administration, Tesla may benefit from favorable regulations for its self-driving technology, a topic reportedly discussed with the Republican president’s transition team. Ives views Musk’s close ties to Trump as a bullish factor for the company.
Featured image via Shutterstock
