Investor's Corner
Tesla (TSLA) S&P inclusion makes a believer out of a notorious skeptic
Tesla (NASDAQ: TSLA) is headed for the S&P 500, and it’s making believers out of notorious skeptic Adam Jonas of Morgan Stanley, who has remained bearish on the automaker for over two years. Jonas has held Sell or Hold ratings on TSLA shares since October 2018, and for the first time since then, he is recommending that investors buy stock in the electric automaker.
“Tesla is on the verge of a profound model shift from selling cars (volume x price) to generating high margin, recurring software and services revenue (platform users x ARPU),” Jonas wrote in a note to investors. “The car business is the entry ticket to unlocking much larger TAMs. We see ~22% upside to PT, ~$142 upside to bull case.”
Jonas and Morgan Stanley upgraded the rating on TSLA stock from Equal-weight to Overweight and revised the price target from $360 to $540. At the time of writing, TSLA shares were trading at $444.96.
* Morgan Stanley Upgrades Tesla to Overweight, Raises PT to $540$TSLA
— David Tayar (@davidtayar5) November 18, 2020
Morgan Stanley and Jonas have shared a relatively bearish outlook on TSLA stock for over two years. Questioning the company’s value in the automotive market, Jonas has never seen Tesla as the dominating entity that it is, especially in the EV sector. Instead, the firm and the analyst alike have recommended that investors stay away from TSLA, expecting a slowing in momentum after strong spikes in stock price. Only recently have TSLA shares remained relatively consistent in price. That is, up until the S&P 500 announced that the automaker would be joining the index in late December, which sent the stock surging up 13% in after-hours trading on Monday evening.
However, the company’s five consecutive profitable quarters, along with sustained growth in production and delivery figures, except Q2 2020, which was slowed by the COVID-19 pandemic, has finally convinced Jonas to take a bullish outlook on TSLA.
Admitting that an early-year report, which analyzed Tesla’s sensitivity in varying scenarios, was not as in-depth as the firm would have liked, Morgan Stanley revisited TSLA in a more recent study. “Since that time, we have had the opportunity to conduct more proprietary research on this topic, tapping into Morgan Stanley’s leading technology equity research team. At the same time, Tesla has continued to develop its services/platform business to a level where we feel that is appropriate for investors to consider to change how they model the company’s revenue and profit streams.”
The firm added that Tesla Energy and Tesla Insurance were both factored into the base case for the first time with the newly-revised price target and rating.
More revisions could come after the company discloses its end-of-year numbers.
“Tesla is currently generating highly profitable cash flow generating service revenue — this business exists today,” he writes. “Due to the growth of service revenue, improved capability (which may trigger step changes in the recognition of deferred revenue) and earnings materiality, we believe it is only a matter of time before investors are provided with far greater levels of disclosure that can trigger a further re-rating of the equity.”
Jonas’ and Morgan Stanley’s backtrack on TSLA stock shows that believers are made out of skeptics. Before too long, analysts who remain bearish on the company’s stock will likely have to retrace their steps and revise their outlooks as Jonas did here.
Disclaimer: Joey Klender is a TSLA Shareholder.
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.”
Tesla bear Michael Burry ditches bet against $TSLA, says ‘media inflated’ the situation
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.
Tesla stock (NASDAQ: TSLA) has landed an elusive “must own” status from Wall Street firm Melius, according to a new note released early this week.
Analyst Rob Wertheimer said Tesla will lead the charge in world-changing tech, given the company’s focus on self-driving, autonomy, and Robotaxi. In a note to investors, Wertheimer said “the world is about to change, dramatically,” because of the advent of self-driving cars.
He looks at the industry and sees many potential players, but the firm says there will only be one true winner:
“Our point is not that Tesla is at risk, it’s that everybody else is.”
The major argument is that autonomy is nearing a tipping point where years of chipping away at the software and data needed to develop a sound, safe, and effective form of autonomous driving technology turn into an avalanche of progress.
Wertheimer believes autonomy is a $7 trillion sector,” and in the coming years, investors will see “hundreds of billions in value shift to Tesla.”
A lot of the major growth has to do with the all-too-common “butts in seats” strategy, as Wertheimer believes that only a fraction of people in the United States have ridden in a self-driving car. In Tesla’s regard, only “tens of thousands” have tried Tesla’s latest Full Self-Driving (Supervised) version, which is v14.
Tesla Full Self-Driving v14.2 – Full Review, the Good and the Bad
When it reaches a widespread rollout and more people are able to experience Tesla Full Self-Driving v14, he believes “it will shock most people.”
Citing things like Tesla’s massive data pool from its vehicles, as well as its shift to end-to-end neural nets in 2021 and 2022, as well as the upcoming AI5 chip, which will be put into a handful of vehicles next year, but will reach a wider rollout in 2027, Melius believes many investors are not aware of the pace of advancement in self-driving.
Tesla’s lead in its self-driving efforts is expanding, Wertheimer says. The company is making strategic choices on everything from hardware to software, manufacturing, and overall vehicle design. He says Tesla has left legacy automakers struggling to keep pace as they still rely on outdated architectures and fragmented supplier systems.
Tesla shares are up over 6 percent at 10:40 a.m. on the East Coast, trading at around $416.
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