According to media reports, Morgan Stanley recently reaffirmed Tesla as its top pick among U.S. auto stocks. The firm stated that even if Tesla's core electric vehicle (EV) business faces challenges, its efforts in artificial intelligence (AI) and robotics could drive the company's growth. This news pushed Tesla's stock price up by 2%.
The report was authored by Morgan Stanley analyst Adam Jonas, who has long been bullish on Tesla. Despite mounting pressure on Tesla's vehicle sales due to high borrowing costs in the U.S. and fierce competition from Chinese automakers such as BYD, Jonas praised Tesla's initiatives beyond its automotive business.
Industry data shows that in January 2024, Tesla's sales in Europe declined by 45%, while the overall EV sales in the region grew by 37% during the same period.
However, Jonas stated that Tesla's recent setbacks, including its first annual delivery decline in 2024, mark a transition from a "pure automaker to a highly diversified company in AI and robotics."
In October 2024, Tesla showcased its self-driving taxi. At the same time, Elon Musk heavily promoted the advancements of Tesla's humanoid robot, Optimus, which is expected to be priced between $20,000 and $30,000. Musk has also stated that Tesla will launch a self-driving ride-hailing service in California and Texas this year, though he has not disclosed further details.
As a result, Jonas reiterated his price target of $430 for Tesla's stock, one of the highest targets on Wall Street.
Jonas' statements align with the views of Tesla CEO Elon Musk. Over the past year, Musk has shifted Tesla's focus toward autonomous taxis and AI. However, experts believe that regulatory hurdles and technological limitations may delay the large-scale deployment of self-driving taxis for several years.
This is not the first time Jonas has made bold predictions about Tesla. In September 2023, he claimed that Tesla's Dojo supercomputer could add nearly $600 billion to the company's market capitalization through advancements in autonomous taxis.
Since then, Tesla's market cap has increased by about $150 billion, reaching nearly $950 billion. However, Tesla's stock has underperformed the broader U.S. market this year. The initial optimism following Donald Trump's election victory has faded, and concerns over declining Tesla sales and Musk's close interactions with the White House have led to a 27% drop in Tesla's stock price.
Although Musk has promised to drive sales growth in 2025 by introducing more affordable models, Jonas believes Tesla's deliveries may still decline next year. However, he sees this as an "attractive buying opportunity."
