Investor's Corner
Tesla’s battery tech and software push is starting to make sense for veteran vehicle-makers
When Tesla was designing the Model S, the company made it a point to build the vehicle from the ground up. This means that everything, from the electric cars’ battery packs to its software, are manufactured by Tesla itself. Tesla’s approach to electric cars is the auto equivalent of Apple’s strategy with the iPhone and iOS, and it finally seems to be making sense to some legacy vehicle-makers.
Elon Musk’s private space firm, SpaceX, is known for producing its rockets in-house. Musk took this same approach with Tesla in the company’s early days, and the result of this approach was the Model S, a vehicle like no other on the road, with simple, powerful, all-electric internals and a software that is custom-built for the car. A particularly telling image of this hands-on, in-house approach was taken during the company’s younger days, featuring a much younger CTO JB Straubel assembling one of Tesla’s early battery packs by hand.
And in a lot of ways, this strategy worked. Tesla’s in-house approach for the Model S was a key point in the vehicle’s allure to consumers. This carried over to the Model X, and now, the Model 3. With Tesla’s 2170 cells used in the Model 3 gaining rave reviews from teardown experts like Sandy Munro of Munro and Associates, and with the company preparing to release Software Version 9, Tesla is poised to take even bigger steps in its mission to usher the transition to sustainable mobility.
Tesla’s history is rife with criticism and doubts from the veterans of the auto industry, but now that the company has established itself as a leader in the premium electric car segment, its progress and breakthroughs now seem to be undeniable, even to traditional vehicle makers.
Just recently, a report from German publication Electrive emerged, citing insiders from Jaguar who noted that the veteran carmaker will be using Samsung SDI’s cylindrical 2170 battery cells for the electric cars it would produce from 2020 onwards. This is a big step for Jaguar, considering that the I-PACE, its first all-electric vehicle that can actually compete with the Model X 75D and 100D in terms of performance, is currently using pouch cells from LG Chem.
Using Samsung SDI’s 2170 cells for its electric cars’ batteries would likely benefit Jaguar, considering that the I-PACE is currently being bogged down by reports that the vehicle is lacking in efficiency and range. Jaguar might never admit it, but it’s not difficult to infer that the company’s decision to reportedly commit to 2170 cells was partly influenced by Tesla’s progress in its battery tech.
Tesla Model 3s side by side in a parking lot.
Another vehicle-maker is starting to see the value of software and its relationship to hardware. Earlier today, veteran motorcycle maker Harley-Davidson stated that it is planning to open a dedicated research and development facility in Silicon Valley to support its plans for its upcoming line of electric bikes. Harley-Davidson plans to release its first motorcycle, dubbed the “LiveWire,” sometime next year, and it would be the first of a line that features a “twist and go” system. The LiveWire is set to be followed by other electric bikes in 2022 as the company transitions to producing cleaner and possibly even quicker, more powerful vehicles.
Seemingly taking a cue from Tesla, Harley Davidson is now in full throttle recruiting Silicon Valley talent in electrical, software, and mechanical engineering. Just like Jaguar and its decision to commit to 2170 cells, Harley-Davidson’s decision to establish a Silicon Valley-based team seems to be inspired partly by Tesla and its software-focused electric cars.
Tesla is not a perfect company by any means, and its leader, Elon Musk, is not infallible. Musk himself would be the first to admit that Tesla committed a lot of errors in the past, and it is through these failures that the company was able to fail forward. Tesla is now a much more mature electric car maker that knows its market and knows what it’s doing; and if the recent updates from Jaguar and Harley-Davidson are any indication, it appears that other vehicle-makers are now starting to realize the value of Tesla’s experience.
Tesla received a price target boost from Morgan Stanley, according to a new note on Monday morning, but there is some considerable caution also being communicated over the next year or so.
Morgan Stanley analyst Andrew Percoco took over Tesla coverage for the firm from longtime bull Adam Jonas, who appears to be focusing on embodied AI stocks and no longer automotive.
Percoco took over and immediately adjusted the price target for Tesla from $410 to $425, and changed its rating on shares from ‘Overweight’ to ‘Equal Weight.’
Percoco said he believes Tesla is the leading company in terms of electric vehicles, manufacturing, renewable energy, and real-world AI, so it deserves a premium valuation. However, he admits the high expectations for the company could provide for a “choppy trading environment” for the next year.
He wrote:
“However, high expectations on the latter have brought the stock closer to fair valuation. 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 added that if market cap hurdles are achieved, Morgan Stanley would reduce its price target by 7 percent.
Perhaps the biggest change with Percoco taking over the analysis for Jonas is how he will determine the value of each individual project. For example, he believes Optimus is worth about $60 per share of equity value.
He went on to describe the potential value of Full Self-Driving, highlighting its importance to the Tesla valuation:
“Full Self Driving (FSD) is the crown jewel of Tesla’s auto business; we believe that its leading-edge personal autonomous driving offering is a real game changer, and will remain a significant competitive advantage over its EV and non-EV peers. As Tesla continues to improve its platform with increased levels of autonomy (i.e., hands-off, eyes-off), it will revolutionize the personal driving experience. It remains to be seen if others will be able to keep pace.”
Additionally, Percoco outlined both bear and bull cases for the stock. He believes $860 per share, “which could be in play in the next 12 months if Tesla manages through the EV-downturn,” while also scaling Robotaxi, executing on unsupervised FSD, and scaling Optimus, is in play for the bull case.
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Meanwhile, the bear case is placed at $145 per share, and “assumes greater competition and margin pressure across all business lines, embedding zero value for humanoids, slowing the growth curve for Tesla’s robotaxi fleet to reflect regulatory challenges in scaling a vision-only perception stack, and lowering market share and margin profile for the autos and energy businesses.”
Currently, Tesla shares are trading at around $441.
Tesla bear Michael Burry got blunt with his beliefs over the company’s valuation, which he called “ridiculously overvalued” in a newsletter to subscribers this past weekend.
“Tesla’s market capitalization is ridiculously overvalued today and has been for a good long time,” Burry, who was the inspiration for the movie The Big Short, and was portrayed by Christian Bale.
Burry went on to say, “As an aside, the Elon cult was all-in on electric cars until competition showed up, then all-in on autonomous driving until competition showed up, and now is all-in on robots — until competition shows up.”
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For a long time, Burry has been skeptical of Tesla, its stock, and its CEO, Elon Musk, even placing a $530 million bet against shares several years ago. Eventually, Burry’s short position extended to other supporters of the company, including ARK Invest.
Tesla has long drawn skepticism from investors and more traditional analysts, who believe its valuation is overblown. However, the company is not traded as a traditional stock, something that other Wall Street firms have recognized.
While many believe the company has some serious pull as an automaker, an identity that helped it reach the valuation it has, Tesla has more than transformed into a robotics, AI, and self-driving play, pulling itself into the realm of some of the most recognizable stocks in tech.
Burry’s Scion Asset Management has put its money where its mouth is against Tesla stock on several occasions, but the firm has not yielded positive results, as shares have increased in value since 2020 by over 115 percent. The firm closed in May.
In 2020, it launched its short position, but by October 2021, it had ditched that position.
Tesla has had a tumultuous year on Wall Street, dipping significantly to around the $220 mark at one point. However, it rebounded significantly in September, climbing back up to the $400 region, as it currently trades at around $430.
It closed at $430.14 on Monday.
Investor's Corner
Mizuho keeps Tesla (TSLA) “Outperform” rating but lowers price target
As per the Mizuho analyst, upcoming changes to EV incentives in the U.S. and China could affect Tesla’s unit growth more than previously expected.
Mizuho analyst Vijay Rakesh lowered Tesla’s (NASDAQ:TSLA) price target to $475 from $485, citing potential 2026 EV subsidy cuts in the U.S. and China that could pressure deliveries. The firm maintained its Outperform rating for the electric vehicle maker, however.
As per the Mizuho analyst, upcoming changes to EV incentives in the U.S. and China could affect Tesla’s unit growth more than previously expected. The U.S. accounted for roughly 37% of Tesla’s third-quarter 2025 sales, while China represented about 34%, making both markets highly sensitive to policy shifts. Potential 50% cuts to Chinese subsidies and reduced U.S. incentives affected the firm’s outlook.
With those pressures factored in, the firm now expects Tesla to deliver 1.75 million vehicles in 2026 and 2 million in 2027, slightly below consensus estimates of 1.82 million and 2.15 million, respectively. The analyst was cautiously optimistic, as near-term pressure from subsidies is there, but the company’s long-term tech roadmap remains very compelling.
Despite the revised target, Mizuho remained optimistic on Tesla’s long-term technology roadmap. The firm highlighted three major growth drivers into 2027: the broader adoption of Full Self-Driving V14, the expansion of Tesla’s Robotaxi service, and the commercialization of Optimus, the company’s humanoid robot.
“We are lowering TSLA Ests/PT to $475 with Potential BEV headwinds in 2026E. We believe into 2026E, US (~37% of TSLA 3Q25 sales) EV subsidy cuts and China (34% of TSLA 3Q25 sales) potential 50% EV subsidy cuts could be a headwind to EV deliveries.
“We are now estimating TSLA deliveries for 2026/27E at 1.75M/2.00M (slightly below cons. 1.82M/2.15M). We see some LT drivers with FSD v14 adoption for autonomous, robotaxi launches, and humanoid robots into 2027 driving strength,” the analyst noted.
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