Tesla (TSLA) gets cautiously optimistic outlook from Morgan Stanley

Just recently, Tesla (NASDAQ:TSLA) received an optimistic note from Piper Sandler, with analyst Alexander Potter reiterating an “Overweight” rating and $295 per share price target for the company. Morgan Stanley analyst Adam Jonas, who has long been following Tesla, seems to be on the same page as his fellow analyst. 

As per an Investing.com report, Morgan Stanley has reiterated its “Overweight” rating on Tesla. Analyst Adam Jonas was more optimistic with his TSLA price target than his peer from Piper Sandler, however, as he listed a 12-month price target of $380 per share on Tesla stock. 

In a note, Jonas stated that it is no surprise investors have become cautious with Tesla. The analyst also noted that Tesla is indeed becoming both an automotive company and an artificial intelligence company. It is no longer a case of whether Tesla is one or the other. Tesla is becoming both. 

NEWS: Morgan Stanley’s Adam Jonas has released a new $TSLA note:

“Many investors still debate the merits of Tesla as ‘more than an auto company.’ In our opinion, Tesla is definitely an auto company. It is also an AI company. Think ‘and’ not ‘or.’

“Other thoughts and events… pic.twitter.com/yd8KIJ7syT

— Sawyer Merritt (@SawyerMerritt) December 26, 2023

“It’s not terribly surprising that auto investors are cautious on Tesla given increased competition and a lack of high-volume new products in 2024. In our discussions, many investors still debate the merits of Tesla as more than an auto company. In our opinion, Tesla is definitely an auto company. It is also an Al company. Think ‘and’ not’ or,” the analyst noted. 

While Morgan Stanley’s outlook on Tesla is generally positive, the analyst also warned that the company’s gross margins could continue to drop next year, perhaps even reaching as low as 10%. 

“Looking ahead to 2024, we expect another challenging year for the core auto business. As we mentioned in our recent Ten Auto Surprises report, we would not rule out the potential for Tesla’s gross auto margin to test 10% or for the core OP margin to flip to negative (for a quarter) in the year ahead. All else equal, continued negative surprises on the auto side should be negative for the stock. After all, Tesla is an auto company. But as we’ve learned with Tesla over our years of coverage, all else is rarely equal,” Jonas noted. 

The analyst listed down a number of potential developments that could be relevant for the electric vehicle maker this coming year. These include the Optimus humanoid robot, the Dojo supercomputer, and a “halo effect” of sorts from SpaceX/ Starlink, among others. Jonas also mentioned Tesla’s lead in electric vehicle infrastructure, which may become quite prominent this coming year. 

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