Tesla Receives Price Target Boost from Morgan Stanley Analyst
According to a new note on Monday morning, Tesla received a price target boost from Morgan Stanley analyst Andrew Percoco. However, there is some caution being communicated over the next year or so.
Percoco took over Tesla coverage for the firm from longtime bull Adam Jonas, who is now focusing on embodied AI stocks rather than automotive. He adjusted the price target for Tesla from $410 to $425 and changed its rating on shares from ‘Overweight’ to ‘Equal Weight’.
Percoco acknowledged Tesla as the leading company in electric vehicles, manufacturing, renewable energy, and real-world AI, deserving a premium valuation. However, he cautioned that high expectations could lead to a “choppy trading environment” for the next year.
He stated, “While it is well understood that Tesla is more than an auto manufacturer, we expect a choppy trading environment for the TSLA shares over the next 12 months, as we see downside to estimates, while the catalysts for its non-auto businesses appear priced at current levels.”
Percoco also mentioned that if market cap hurdles are achieved, Morgan Stanley would reduce its price target by 7 percent.
One significant change with Percoco’s analysis is how he values individual projects. For instance, he believes Optimus is worth about $60 per share of equity value. He emphasized the importance of Full Self-Driving and its potential impact on Tesla’s valuation.
He stated, “Full Self Driving (FSD) is the crown jewel of Tesla’s auto business… It remains to be seen if others will be able to keep pace.”
Furthermore, Percoco outlined both bear and bull cases for the stock. The bull case envisions $860 per share in the next 12 months if Tesla manages through the EV downturn and scales Robotaxi, executes unsupervised FSD, and scales Optimus. The bear case, on the other hand, is placed at $145 per share assuming greater competition and margin pressure.
As of now, Tesla shares are trading at around $441.