To say that early 2025 has been difficult for Tesla (NASDAQ: TSLA) stockholders would be an understatement. Company profits and sales figures are way down, and many attribute this to the growing unpopularity of CEO Elon Musk. Despite that, Morgan Stanley analysts are bullish about the company’s long-term outlook. Keep reading to find out why.
Tesla’s public fall from grace has been as sudden as it was unexpected. As recently as a year ago, the business world hailed Musk as everything from an innovator to a genius. Tesla cars were almost unchallenged as America’s favorite EV, and the future looked even brighter. The bottom began falling out shortly after Musk took on a leadership role at DOGE.
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Then there was his open embrace of Germany’s far-right AFD political party. It all combined to create the perfect storm of unpopularity. Tesla sales plummeted in the U.S. and Europe despite rising demand for EVs. The stock tanked, and things got so bad that there were rumors that Tesla’s board was quietly searching for a new CEO. That seems like a rather odd backstory for a stock that Morgan Stanley Analyst Adam Jonas rated as a “top pick.”
To be certain, Jonas is not predicting that disgruntled Tesla customers will come rushing back anytime soon. His prediction is based on other factors, most notably the belief that Tesla is more than just a car company.
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According to Tipranks, Jonas is basing his analysis on an acronym that he calls D.R.E.A.M.S. The breakdown is:
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- Data: Even with plummeting sales numbers, Tesla has over 7 million vehicles on the road and expects that there will be 40 million by 2040. This creates an avalanche of driver and consumer data for Tesla to manipulate and market
- Robotics: Tesla produces cars using its own robots, and this technology will have value beyond just EV production
- Energy: Tesla is also a leader in producing electrical batteries that can power operations both large and small
- AI: Tesla has an advance AI department that’s helping to develop its self-driving cars and will have other valuable uses in the future
- Manufacturing: Jonas says Tesla is “the “most vertically integrated, US-local sourced auto company in the world.”
- Space: Jonas believes Tesla’s SpaceX division is the “data transport layer – the connective tissue of the AI ecosystem.”
Jonas believes this combination of advantages and assets will allow Tesla to survive the current downturn and thrive in the long term. His analysis noted, “We’re often asked what is Tesla’s secret sauce? What’s its moat? Well – it’s not really 1 thing but the combination of 6 attributes that set Tesla apart from its peers.”
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He expanded on this during a CNBC interview, saying, “I think Tesla is an overvalued auto company, but an undervalued onshore and renewable energy company. It is time to unleash the arsenal of democracy to control our energy destiny, and we at Morgan Stanley, at least, we struggle to find a name that’s better positioned than Tesla to show us the way to do that.”
Jonas has given Tesla a rating of Overweight and set a $410 price target. That means he sees Tesla as roughly 20% undervalued. That’s a bullish prediction considering Tesla’s current circumstances, but he’s not alone in his belief that Tesla could reach the $400 per share plateau. Benzinga compiled Tesla target prices from 27 analysts, who have a consensus price expectation of $295.23, but Stifel sees Tesla hitting $450.
Wedbush’s most recent guidance from February sees Tesla hitting $475 per share. Jonas’s continued belief in Tesla is rooted in the idea that the company’s other technologies and capabilities give it viability as something beyond a car company. That means this could be the perfect time for investors to get back on the Tesla train.
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