- Morgan Stanley on Wednesday boosted its Tesla stock price target to $1,050 from $740. It also updated its “bull case scenario” to $2,500 from $2,070.
- The bull case is a more than a 65% increase from where shares of Tesla currently trade.
- Still, the firm has an “underweight” rating on shares of the automaker, as a “host of near-term risks” to the upside remain, according to a note from analyst Adam Jonas.
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Morgan Stanley on Wednesday boosted its “bull case scenario” on Tesla to $2,500, implying a more than 65% surge from where shares currently trade.
Still, the firm has an “underweight” rating on shares of the automaker, as a “host of near-term risks” to the upside remain, according to a note from analyst Adam Jonas.
The bump in Morgan Stanley’s Tesla price targets was almost entirely driven by analysts increasing the forecast for units to 3 million by 2030, from 2.3 million previously.
“It’s becoming increasingly obvious that Tesla is going to become a very large company, approaching (if not exceeding) Toyota or VW revenues in the next decade and leaving the world’s largest luxury OEMs behind,” Jonas wrote. “For the first time in our 10 years of coverage we’re starting to model this company as a very, very large auto maker.”
The boosted price target - the second in recent weeks from Morgan Stanley - comes after Tesla's blockbuster second quarter earnings report. The company reported its fourth consecutive quarterly profit, exceeding Wall Street's expectations and paving the way for potential inclusion in the S&P 500 index.
Currently, Tesla shares are discounting roughly 5 million units and imply 10% of industry revenues and 20% to 30% of industry profit, according to the note. Morgan Stanley's bull case is possible if Tesla adds even more volume to its auto business, and over $100 billion in value to Tesla mobility, connected services, and battery supply.
Morgan Stanley's new forecasts give Tesla "credit for continuing to attract the world's best talent at the industry's lowest-priced cost of capital," said Jonas. The firm expects Tesla to continue to grow at a rapid speed, and thinks that the launch of the automaker's Semi could open doors for an important new market.
Still, there are risks to the bull case ahead, according to Jonas. Those include Tesla overly dependending on China, and the underestimation of competition from other players and overestimation of the "autonomous opportunity," according to the note.
As Tesla continues its searing rally, Jonas sees lofty investor expectations as a burden "skewed to disappoint," he wrote.
Shares of Tesla are up roughly 265% year-to-date.
