Tesla stock jumps 3.4% in premarket trading as analyst sees over 45% upside

Morgan Stanley has reinstated Tesla as its “Top Pick” in the US auto sector, setting a price target of $430, which implies more than 47% upside from its current share price.

The firm sees the recent 30% year-to-date decline in Tesla shares as a compelling entry point, emphasizing the company’s transition beyond electric vehicles into artificial intelligence and robotics.

While Tesla’s vehicle deliveries have softened, Morgan Stanley believes the company is evolving from a pure automotive player into a broader technology firm focused on AI-driven automation.

Tesla stock was up over 3% in pre-market trading on Monday.

Tesla’s growth drivers

Analysts expect Tesla’s total addressable market to expand significantly as AI moves from the digital space into physical applications, including autonomous systems and humanoid robotics.

One of the key long-term growth drivers identified by Morgan Stanley is Tesla’s potential in robotics.

The analysts, led by Adam Jonas, estimate that if Tesla Optimus humanoid robots capture even 1% of the US labor force, it could add approximately $100 per share to Tesla’s valuation.

They see increasing investor interest in this segment, noting that humanoid robotics could present a larger opportunity than autonomous vehicles.

Tesla’s energy business is also gaining traction, driven by rising global energy demand and the increasing power consumption of AI systems.

Morgan Stanley believes Tesla Energy could eventually surpass the company’s automotive division in value, particularly given the higher margins in energy storage.

Another factor supporting Morgan Stanley’s bullish stance is Tesla’s declining reliance on China.

The firm projects that China’s share of Tesla’s total revenue will systematically decrease, falling from 21% in 2024 to around 6-7% by 2030.

They expect China’s share of Tesla’s global auto unit volume to drop to approximately 10% by the end of the decade.

Morgan Stanley also highlights Tesla’s increasing revenue from recurring services and its strong position in US manufacturing as additional positives.

However, the firm acknowledges near-term risks, including the prolonged downturn in the EV market and governance concerns related to Elon Musk’s push for a 25% blocking minority stake.

Analysts also caution that Tesla’s full self-driving and robotaxi ambitions come with high near-term expectations that may take longer to materialize.

Morgan Stanley reiterated its $800 bull case target for Tesla, stating that while the stock’s journey may be volatile, Tesla’s positioning in AI and robotics gives it a significant competitive edge for the future.

Chinese EV sales show strong momentum

The positive call comes even as Tesla competitors have been showing strong sales growth.

BYD continued its strong momentum in February, recording another surge in monthly sales while many competitors saw slower growth or declines.

The company sold over 318,000 pure electric and hybrid passenger vehicles last month, marking a 161% year-on-year increase and surpassing January’s sales. Overseas sales also hit a new record, reaching 67,025 units.

Geely Automobile Holdings Ltd., BYD’s closest competitor, reported an 84% year-on-year rise to nearly 205,000 vehicles in February. However, sales fell below its January total.

Tesla reported delivering 495,570 battery electric vehicles (BEVs) in the fourth quarter of 2024, falling short of BYD’s 595,413 BEVs sold during the same period.

However, for the full year, Tesla retained its position as the world’s top-selling pure EV brand, delivering 1,789,226 BEVs despite a 1.1% year-over-year decline. BYD, while closing the gap, delivered 1,764,992 BEVs—24,234 units fewer than Tesla over the twelve months.

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