Morgan Stanley reaffirms Overweight rating on Tesla, emphasizing its dual role as auto and AI company.
Morgan Stanley has maintained an Overweight rating on Tesla Inc. (NASDAQ:TSLA) and set a 12-month price target of $380.00, anticipating another eventful year for the electric car manufacturer.
The firm notes that auto investors’ caution towards Tesla is understandable, considering the increased competition and absence of major new product launches in 2024. Morgan Stanley predicts a challenging year for Tesla, with a possibility of the gross auto margin hitting 10%.
There’s a risk of the core operating margin dipping into the negative in the next year, particularly if current negative trends in the automobile sector continue, which could impact the stock negatively.
Despite these challenges and a turbulent 2023 marked by a 2-million-unit safety recall and revision risks, Morgan Stanley remains optimistic about Tesla. This optimism stems from the fact that 77% of their valuation of Tesla’s stock is based on Network Services, Mobility, third-party battery/FSD licensing, Energy, and Insurance.
Morgan Stanley highlights that Tesla is more than just an automaker; it’s also an AI company. The development of products like the Optimus robot and Tesla’s custom supercomputing project, Dojo, are seen as key drivers for expanding Tesla’s technological footprint beyond the automotive industry.
The analysts sum up their view with, “In our opinion, Tesla is definitely an auto company. It is also an AI company. Think ‘and’ not ‘or.’”
Tesla’s shares saw an uptick of 0.82% in early trading on Tuesday.
