Investor's Corner
Tesla stock named ‘Top Pick’ by Morgan Stanley, citing future growth
Morgan Stanley named Tesla one of its three top picks for 2023, citing its future growth opportunities.
Despite Tesla’s recent challenges with its stock valuation, many analysts still see the automaker’s stock as an opportunity for value growth. Forbes and the Motley Fool have recently published pieces putting forward similar arguments, while U.S. Congressmen have yet to sell their stock in the company. Now, Morgan Stanley has named Tesla as one of its “Top Picks” for 2023.
CNBC initially reported on Morgan Stanley’s Tesla pick, and the analysts quickly highlighted the investment group’s optimism. Not only did it maintain its price target for Tesla at $330, counter to moves from Goldman Sachs, but Morgan Stanley doubled down, stating, “while we see 2023 as a challenging year for the EV market categorically, we believe Tesla’s gap to competition can widen.”
Some believe Tesla’s inclusion on Morgan Stanley’s list is a questionable choice; as pointed out by CNBC, many are worried about the company’s growth in the near future, particularly relating to Tesla CEO Elon Musk. Many investors have argued that Mr. Musk has become too divisive or that he may be dedicating too much time to his newest acquisition, Twitter. And as mentioned above, these concerns were exemplified in Goldman Sach’s most recent Tesla stock price target cut from $305 per share to $235.
Tesla is familiar with the separation of its stock price from more tangible measurements, even Mr. Musk at times claiming that the stock’s price was inflated. However, we may be seeing a disconnect in the opposite direction.
Looking at Tesla’s financials and the company’s future, investors can get a better idea of the condition (and perhaps opportunity) of the stock. Tesla has solid fundamentals; high earnings and profitability, low amounts of debt relative to competitors, and continuous growth in demand for all of its products. Looking at future product offerings offers more good news.
Tesla has yet another opportunity to become a disruptor within the automotive industry with its Semi truck, which it has already started to deliver. The brand’s hotly anticipated Cybertruck is finally coming to fruition, with pre-fabrication work already occurring. And the next generation of the brand’s golden goose, the Model 3, is just on the horizon.
This is not to say that Tesla’s stock success is guaranteed, far from it. As pointed out by numerous market analysts and even Elon Musk himself, the global economy is in a very precarious situation currently, especially as the United States Federal Reserve continues to push interest rates ever-higher to battle climbing inflation. At the same time, supply shortages may only be getting worse instead of better as the tension between the U.S. and China continues to build, leading to numerous tech suppliers facing challenges in producing essential parts.
Instead, Morgan Stanley might be arguing for a healthy dose of cautious optimism. In the short term, it remains pretty evident that many tech stocks could continue to fall. Still, for those willing to hold their position, perhaps until recession worries pass by, they may be in for a fantastic opportunity.
William owns stock in Tesla and index funds that include the stock.
What do you think of the article? Do you have any comments, questions, or concerns? Shoot me an email at william@teslarati.com. You can also reach me on Twitter @WilliamWritin. If you have news tips, email us at tips@teslarati.com!
Tesla stock (NASDAQ: TSLA) closed at an all-time high on Tuesday, jumping over 3 percent during the day and finishing at $489.88.
The price beats the previous record close, which was $479.86.
Shares have had a crazy year, dipping more than 40 percent from the start of the year. The stock then started to recover once again around late April, when its price started to climb back up from the low $200 level.
This week, Tesla started to climb toward its highest levels ever, as it was revealed on Sunday that the company was testing driverless Robotaxis in Austin. The spike in value pushed the company’s valuation to $1.63 trillion.
Tesla Robotaxi goes driverless as Musk confirms Safety Monitor removal testing
It is the seventh-most valuable company on the market currently, trailing Nvidia, Apple, Alphabet (Google), Microsoft, Amazon, and Meta.
Shares closed up $14.57 today, up over 3 percent.
The stock has gone through a lot this year, as previously mentioned. Shares tumbled in Q1 due to CEO Elon Musk’s involvement with the Department of Government Efficiency (DOGE), which pulled his attention away from his companies and left a major overhang on their valuations.
However, things started to rebound halfway through the year, and as the government started to phase out the $7,500 tax credit, demand spiked as consumers tried to take advantage of it.
Q3 deliveries were the highest in company history, and Tesla responded to the loss of the tax credit with the launch of the Model 3 and Model Y Standard.
Additionally, analysts have announced high expectations this week for the company on Wall Street as Robotaxi continues to be the focus. With autonomy within Tesla’s sights, things are moving in the direction of Robotaxi being a major catalyst for growth on the Street in the coming year.
Elon Musk
Tesla needs to come through on this one Robotaxi metric, analyst says
“We think the key focus from here will be how fast Tesla can scale driverless operations (including if Tesla’s approach to software/hardware allows it to scale significantly faster than competitors, as the company has argued), and on profitability.”
Tesla needs to come through on this one Robotaxi metric, Mark Delaney of Goldman Sachs says.
Tesla is in the process of rolling out its Robotaxi platform to areas outside of Austin and the California Bay Area. It has plans to launch in five additional cities, including Houston, Dallas, Miami, Las Vegas, and Phoenix.
However, the company’s expansion is not what the focus needs to be, according to Delaney. It’s the speed of deployment.
The analyst said:
“We think the key focus from here will be how fast Tesla can scale driverless operations (including if Tesla’s approach to software/hardware allows it to scale significantly faster than competitors, as the company has argued), and on profitability.”
Profitability will come as the Robotaxi fleet expands. Making that money will be dependent on when Tesla can initiate rides in more areas, giving more customers access to the program.
There are some additional things that the company needs to make happen ahead of the major Robotaxi expansion, one of those things is launching driverless rides in Austin, the first city in which it launched the program.
This week, Tesla started testing driverless Robotaxi rides in Austin, as two different Model Y units were spotted with no occupants, a huge step in the company’s plans for the ride-sharing platform.
Tesla Robotaxi goes driverless as Musk confirms Safety Monitor removal testing
CEO Elon Musk has been hoping to remove Safety Monitors from Robotaxis in Austin for several months, first mentioning the plan to have them out by the end of 2025 in September. He confirmed on Sunday that Tesla had officially removed vehicle occupants and started testing truly unsupervised rides.
Although Safety Monitors in Austin have been sitting in the passenger’s seat, they have still had the ability to override things in case of an emergency. After all, the ultimate goal was safety and avoiding any accidents or injuries.
Goldman Sachs reiterated its ‘Neutral’ rating and its $400 price target. Delaney said, “Tesla is making progress with its autonomous technology,” and recent developments make it evident that this is true.
Investor's Corner
Tesla gets bold Robotaxi prediction from Wall Street firm
Last week, Andrew Percoco took over Tesla analysis for Morgan Stanley from Adam Jonas, who covered the stock for years. Percoco seems to be less optimistic and bullish on Tesla shares, while still being fair and balanced in his analysis.
Tesla (NASDAQ: TSLA) received a bold Robotaxi prediction from Morgan Stanley, which anticipates a dramatic increase in the size of the company’s autonomous ride-hailing suite in the coming years.
Last week, Andrew Percoco took over Tesla analysis for Morgan Stanley from Adam Jonas, who covered the stock for years. Percoco seems to be less optimistic and bullish on Tesla shares, while still being fair and balanced in his analysis.
Percoco dug into the Robotaxi fleet and its expansion in the coming years in his latest note, released on Tuesday. The firm expects Tesla to increase the Robotaxi fleet size to 1,000 vehicles in 2026. However, that’s small-scale compared to what they expect from Tesla in a decade.
Tesla expands Robotaxi app access once again, this time on a global scale
By 2035, Morgan Stanley believes there will be one million Robotaxis on the road across multiple cities, a major jump and a considerable fleet size. We assume this means the fleet of vehicles Tesla will operate internally, and not including passenger-owned vehicles that could be added through software updates.
He also listed three specific catalysts that investors should pay attention to, as these will represent the company being on track to achieve its Robotaxi dreams:
- Opening Robotaxi to the public without a Safety Monitor. Timing is unclear, but it appears that Tesla is getting closer by the day.
- Improvement in safety metrics without the Safety Monitor. Tesla’s ability to improve its safety metrics as it scales miles driven without the Safety Monitor is imperative as it looks to scale in new states and cities in 2026.
- Cybercab start of production, targeted for April 2026. Tesla’s Cybercab is a purpose-built vehicle (no steering wheel or pedals, only two seats) that is expected to be produced through its state-of-the-art unboxed manufacturing process, offering further cost reductions and thus accelerating adoption over time.
Robotaxi stands to be one of Tesla’s most significant revenue contributors, especially as the company plans to continue expanding its ride-hailing service across the world in the coming years.
Its current deployment strategy is controlled and conservative to avoid any drastic and potentially program-ruining incidents.
So far, the program, which is active in Austin and the California Bay Area, has been widely successful.
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