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Tesla’s $10 ‘bear case’ from Morgan Stanley highlights the noise surrounding TSLA

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Tesla stock (NASDAQ:TSLA) looked alarming right before the markets opened on Tuesday amidst news that Morgan Stanley analyst Adam Jonas had lowered the electric car maker’s “bear case outcome” to just $10 per share, a steep drop from his initial worst-case scenario estimate of $97 per share. The analyst’s findings dealt a blow to Tesla stock during pre-market trading, pushing shares down by over 3% at one point.

The Morgan Stanley analyst’s worst-case estimate was driven in part by concerns about Tesla’s business in China, which would likely be adversely affected by the ongoing trade war between the country and the United States. According to Jonas, Tesla could generate about $9 billion in revenues in China between 2020 and 2024, but if Beijing targets the company with reprisal tariffs and restrictions, that figure could be halved, resulting in more than $16 billion of the electric car maker’s market value getting wiped out.

“Our revised case assumes Tesla misses our current Chinese volume forecast by roughly half, to account for the highly volatile trade situation in the region, particularly around areas of technology, which we believe run a high and increasing risk of government/regulatory attention. We believe as Tesla’s share price declines, the likelihood of the company potentially seeking alternatives from strategic/industrial/financial partners rises,” Jonas noted.

The analyst’s radical $10 estimate for Tesla unsurprisingly attracted a lot of attention, and it did not take long before news of Morgan Stanley’s updated views made the rounds online. What was not reported as much was that Adam Jonas kept his $230 price target on TSLA stock, as well as his equal-weight rating for the company under the firm’s best-case scenario. Also left out in a number of reports was Morgan Stanley’s best-case price target of $391, which is actually pretty optimistic considering the recent movements of Tesla stock.

Other personalities in the financial world eventually gave their take on Jonas’ worst-case scenario for Tesla. Jim Cramer, who has traded barbs with Elon Musk in the past, described the $10 estimate as “insane” and a simple gimmick. “Setting a price target of $10 on a $200 stock really is insane. How about $8? How about $12? Ten basically says, ‘I want to get talked about. Let’s talk about me,’” Cramer said, adding that “if he had done $47 would we have talked about him? No, but 10. Ten is right in your face. I question this piece of research.”

Cathie Wood of ARK Invest, who still maintains a positive stance on the company, also questioned the Morgan Stanley analyst’s findings. “Also interesting to note, Jonas cut his worst-case price by more than 90% but left his price target unchanged at $230. So, I guess he is suggesting that the probability of the bear case has dropped significantly, and/ or the probability of the bull case has increased,” Wood wrote on Twitter.

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The Tesla Model 3 production line. (Photo: Tesla)

Considering the pervading negativity surrounding Tesla’s narrative today, it is unsurprising to see aspects of Morgan Stanley’s recent note getting misinterpreted. A look at social media platforms such as Twitter, for example, would reveal some Tesla critics stating that the $10 worst-case estimate was Morgan Stanley’s new price target for TSLA stock. This is untrue, but these instances all but highlight how easy it is for misconceptions about the electric car maker could spread.

This pervading negativity is seen in the mainstream coverage of the company. On Monday, Dan Ives from Wedbush Securities cut his price target and penned a scathing note to Tesla, even describing Elon Musk’s initiatives such as Full Self-Driving and the Robotaxi network as “sci-fi projects.” Ives’ statements on Monday garnered widespread attention, significantly more than his comments on Tuesday, when he explained that he does not think Tesla will eventually file for bankruptcy. Ives also noted on Tuesday that Tesla could return to profitability in the future, provided that demand is sustained and costs are cut.

At this point, it appears that the time is right for Tesla to adopt a more assertive PR strategy that is ready to debunk misinformation and clarify misconceptions at a moment’s notice. By doing so, Tesla can lay out its case clearly, providing explanations as necessary and leaving little to speculation. This would require constant vigilance on the part of the electric car maker, but it would help, at least by straightening out the facts of a story. These initiatives, coupled with an aggressive information campaign that dispels misconceptions about the company and its vehicles, could ultimately allow Tesla to change the course of its narrative for the better.

As of writing, Tesla stock is trading -0.29% at $204.76 per share.

Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.

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Simon is an experienced automotive reporter with a passion for electric cars and clean energy. Fascinated by the world envisioned by Elon Musk, he hopes to make it to Mars (at least as a tourist) someday. For stories or tips--or even to just say a simple hello--send a message to his email, simon@teslarati.com or his handle on X, @ResidentSponge.

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Tesla blacklisted by Swedish pension fund AP7 as it sells entire stake

A Swedish pension fund is offloading its Tesla holdings for good.

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tesla
(Credit: Tesla)

Tesla shares have been blacklisted by the Swedish pension fund AP7, who said earlier today that it has “verified violations of labor rights in the United States” by the automaker.

The fund ended up selling its entire stake, which was worth around $1.36 billion when it liquidated its holdings in late May. Reuters first reported on AP7’s move.

Other pension and retirement funds have relinquished some of their Tesla holdings due to CEO Elon Musk’s involvement in politics, among other reasons, and although the company’s stock has been a great contributor to growth for many funds over the past decade, these managers are not willing to see past the CEO’s right to free speech.

However, AP7 says the move is related not to Musk’s involvement in government nor his political stances. Instead, the fund said it verified several labor rights violations in the U.S.:

“AP7 has decided to blacklist Tesla due to verified violations of labor rights in the United States. Despite several years of dialogue with Tesla, including shareholder proposals in collaboration with other investors, the company has not taken sufficient measures to address the issues.”

Tesla made up about 1 percent of the AP7 Equity Fund, according to a spokesperson. This equated to roughly 13 billion crowns, but the fund’s total assets were about 1,181 billion crowns at the end of May when the Tesla stake was sold off.

Tesla has had its share of labor lawsuits over the past few years, just as any large company deals with at some point or another. There have been claims of restrictions against labor union supporters, including one that Tesla was favored by judges, as they did not want pro-union clothing in the factory. Tesla argued that loose-fitting clothing presented a safety hazard, and the courts agreed.

tesla employee

(Photo: Tesla)

There have also been claims of racism at the Fremont Factory by a former elevator contractor named Owen Diaz. He was awarded a substantial sum of $137m. However, U.S. District Judge William Orrick ruled the $137 million award was excessive, reducing it to $15 million. Diaz rejected this sum.

Another jury awarded Diaz $3.2 million. Diaz’s legal team said this payout was inadequate. He and Tesla ultimately settled for an undisclosed amount.

AP7 did not list any of the current labor violations that it cited as its reason for

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Investor's Corner

xAI targets $5 billion debt offering to fuel company goals

Elon Musk’s xAI is targeting a $5B debt raise, led by Morgan Stanley, to scale its artificial intelligence efforts.

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(Credit: xAI)

xAI’s $5 billion debt offering, marketed by Morgan Stanley, underscores Elon Musk’s ambitious plans to expand the artificial intelligence venture. The xAI package comprises bonds and two loans, highlighting the company’s strategic push to fuel its artificial intelligence development.

Last week, Morgan Stanley began pitching a floating-rate term loan B at 97 cents on the dollar with a variable interest rate of 700 basis points over the SOFR benchmark, one source said. A second option offers a fixed-rate loan and bonds at 12%, with terms contingent on investor appetite. This “best efforts” transaction, where the debt size hinges on demand, reflects cautious lending in an uncertain economic climate.

According to Reuters sources, Morgan Stanley will not guarantee the issue volume or commit its own capital in the xAI deal, marking a shift from past commitments. The change in approach stems from lessons learned during Musk’s 2022 X acquisition when Morgan Stanley and six other banks held $13 billion in debt for over two years.

Morgan Stanley and the six other banks backing Musk’s X acquisition could only dispose of that debt earlier this year. They capitalized on X’s improved operating performance over the previous two quarters as traffic on the platform increased engagement around the U.S. presidential elections. This time, Morgan Stanley’s prudent strategy mitigates similar risks.

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Beyond debt, xAI is in talks to raise $20 billion in equity, potentially valuing the company between $120 billion and $200 billion, sources said. In April, Musk hinted at a significant valuation adjustment for xAI, stating he was looking to put a “proper value” on xAI during an investor call.

As xAI pursues this $5 billion debt offering, its financial strategy positions it to lead the AI revolution, blending innovation with market opportunity.

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Tesla tops Cathie Wood’s stock picks, predicts $2,600 surge

Tesla’s future lies beyond cars—with robotaxis, humanoid bots & AI-driven factories. Cathie Wood predicts a 9x surge in 5 years.

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Cathie Wood shared that Tesla is her top stock pick. During Steven Bartlett’s podcast “The Diary Of A CEO,” the Ark Invest founder highlighted Tesla’s innovative edge, citing its convergence of robotics, energy storage, and AI.

“Because think about it. It is a convergence among three of our major platforms. So, robots, energy storage, AI,” Wood said of Tesla. She emphasized the company’s potential beyond its current offerings, particularly with its Optimus robots.

“And it’s not stopping with robotaxis; there’s a story beyond that with humanoid robots, and our $2,600 number has nothing for humanoid robots. We just thought it’d be an investment, period,” she added.

In June 2024, Ark Invest issued a $2,600 price target for Tesla, which Wood reaffirmed in a March Bloomberg interview, projecting the stock to reach this level within five years. She told Bartlett that Tesla’s Optimus robots would drive productivity gains and create new revenue streams.

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Elon Musk echoed Wood’s optimism in a CNBC interview last month.

“We expect to have thousands of Optimus robots working in Tesla factories by the end of this year, beginning this fall. And we expect to scale Optimus up faster than any product, I think, in history to get to millions of units per year as soon as possible,” Musk said.

Tesla’s stock has faced volatility lately, hitting a peak closing price of $479 in December after President Donald Trump’s election win. However, Musk’s involvement with the White House DOGE office triggered protests and boycotts, contributing to a stock decline of over 40% from mid-December highs by March.

The volatility in Tesla stock alarmed investors, who urged Musk to refocus on the company. In a May earnings call, Musk responded, stating he would be “scaling down his involvement with DOGE to focus on Tesla.” Through it all, Cathie Wood and Ark Invest maintained their faith in Tesla. Wood, in particular, predicted that the “brand damage” Tesla experienced earlier this year would not be long term.

Despite recent fluctuations, Wood’s confidence in Tesla underscores its potential to redefine industries through AI and robotics. As Musk shifts his focus back to Tesla, the company’s advancements in Optimus and other innovations could drive it toward Wood’s ambitious $2,600 target, positioning Tesla as a leader in the evolving tech landscape.

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