Investor's Corner
Tesla stock: Morgan Stanley pumps the brakes and lowers PT ahead of earnings
Analysts at Morgan Stanley pumped the brakes on Tesla stock by lowering its price target ahead of the automaker’s Earnings Call late this week.
Tesla shares are down 15 percent so far this year. Over the past year, shares are up 66 percent, but moving into 2024, some bulls are remaining cautious.
Morgan Stanley is one of them. In a note to investors released on Monday, analysts at the firm noted there are several factors that could spell trouble for global demand, including increased competition, pricing instability, and slowing demand for EVs.
Tesla will report Earnings on Wednesday. The company reached its 1.8 million unit delivery goal in 2023. It also dominated EV deliveries in the United States and Europe and was toward the top of the list in China. It launched the Cybertruck, a new Model 3 design, and has plenty of other catalysts moving into 2024. However, an ever-changing landscape, more competition, and other factors have Morgan Stanley proceeding with increased caution for the year.
In a note from analysts at the firm, they wrote about the potential risks for the stock this year:
-->“Global EV momentum is stalling. The market is over-supplied vs. demand. We anticipate Tesla’s 2024 outlook to be cautious on volume and profitability…Tough sledding for EVs but we remain OW on AI and robotics optionality.”
Adam Jonas listed several risk factors for the stock in the note, which include price cuts, weakening or expiration of EV incentives, excess capacity in China, residual value risks, and fleets cutting EV concentration.
Price Cuts
Tesla is still working on pricing stability, which improved greatly throughout 2023 but still offered some concern for investors. Less expensive EVs equate to increased adoption, but it also puts pressure on margins and profitability for the company.
Tesla has already cut prices in China and Europe this year, which is concerning from Morgan Stanley’s standpoint:
“Tesla has already announced price cuts in China and Europe that matched or exceeded our prior expectations of price reductions for the full year 2024. The German Tesla price cuts came merely days after Tesla announced production cuts at Giga Berlin related to Red Sea shipping issues. Lower production is usually positive for prices. This suggests the European EV situation is changing quite rapidly.”
-->Expiration/Weakening of EV Incentives
In the U.S. especially, Tesla is adjusting the narratives that surround some of its vehicles and their eligibility for EV tax credits. Two Model 3 configurations lost the tax credit, and as it is one of the best-selling EVs in Tesla’s lineup, it is not a positive, although the car is still affordable.
Morgan Stanley is also skeptical about the future of the IRA, stating it looks to be “increasingly uncertain.”
Some consumers are in need of these incentives to purchase the vehicle, and even if they are not a necessity, they are a benefit. It could sway many consumers in the direction of other vehicles. It is important to note that Volkswagen, BMW, Audi, and Ford also lost tax credit eligibility on some of their EVs.
Excess Capacity in China
Morgan Stanley said its Chinese team noted sales cannibalization, increased battery capacity and inventory, and the expiration of “certain local stimulus measures” as reasons Tesla may feel the heat.
Residual Value Risks
Price cuts from OEMs have pressured EV residuals, and dealerships are less bullish on electric cars than ever. Jonas writes that residual value volatility “hurts the value proposition for consumers and creates uncertainty around leasing partners who don’t want to hold this risk.” This includes Tesla.
-->Tesla’s leasing penetration is in the low single digits globally, Morgan Stanley notes.
Fleets Cutting EVs
Hertz made a drastic announcement earlier this month, stating it would backtrack its massive commitment to EVs as it did not properly account for the cost of damages. One-third of its EV fleet is being sold off, and a portion of the proceeds will go back into combustion engine vehicles.
Other companies are doing this as well on a smaller scale. Fleets offer a few advantages, including a large boost to orders for EV makers. Hertz planned to buy 100,000 Teslas, for example.
They also give drivers an opportunity to drive EVs before buying. While this will still be available, it will be less widespread.
Price Target Downgrade
Morgan Stanley moved its price target to $345 from $380.
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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.
Investor's Corner
Tesla analyst maintains $500 PT, says FSD drives better than humans now
The team also met with Tesla leaders for more than an hour to discuss autonomy, chip development, and upcoming deployment plans.
Tesla (NASDAQ:TSLA) received fresh support from Piper Sandler this week after analysts toured the Fremont Factory and tested the company’s latest Full Self-Driving software. The firm reaffirmed its $500 price target, stating that FSD V14 delivered a notably smooth robotaxi demonstration and may already perform at levels comparable to, if not better than, average human drivers.
The team also met with Tesla leaders for more than an hour to discuss autonomy, chip development, and upcoming deployment plans.
Analysts highlight autonomy progress
During more than 75 minutes of focused discussions, analysts reportedly focused on FSD v14’s updates. Piper Sandler’s team pointed to meaningful strides in perception, object handling, and overall ride smoothness during the robotaxi demo.
The visit also included discussions on updates to Tesla’s in-house chip initiatives, its Optimus program, and the growth of the company’s battery storage business. Analysts noted that Tesla continues refining cost structures and capital expenditure expectations, which are key elements in future margin recovery, as noted in a Yahoo Finance report.
Analyst Alexander Potter noted that “we think FSD is a truly impressive product that is (probably) already better at driving than the average American.” This conclusion was strengthened by what he described as a “flawless robotaxi ride to the hotel.”
-->Street targets diverge on TSLA
While Piper Sandler stands by its $500 target, it is not the highest estimate on the Street. Wedbush, for one, has a $600 per share price target for TSLA stock.
Other institutions have also weighed in on TSLA stock as of late. HSBC reiterated a Reduce rating with a $131 target, citing a gap between earnings fundamentals and the company’s market value. By contrast, TD Cowen maintained a Buy rating and a $509 target, pointing to strong autonomous driving demonstrations in Austin and the pace of software-driven improvements.
Stifel analysts also lifted their price target for Tesla to $508 per share over the company’s ongoing robotaxi and FSD programs.
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