Morgan Stanley’s Love Letter Gives Tesla Shares A Boost

Morgan Stanley’s Love Letter Gives Tesla Shares A Boost
Daniel Johnston

3 months ago2 mins

If you own shares in Tesla, you’ve had a lot to cheer lately, with its stock more than doubling this year. And analysts at Morgan Stanley reckon you’ll have even more reason to break out the bubbly soon, thanks to Tesla’s Dojo supercomputer, which went into production in July. It’s designed to train AI models for self-driving cars, and Morgan Stanley estimates that could open up an entirely new market for the world’s most valuable carmaker – like what AWS did for Amazon in the cloud space. The idea is that Dojo could allow for the faster adoption of robotaxis, and ultimately make highly profitable software and services a key driver of the business. That’s why, in its latest research note, Morgan Stanley jacked up its 12-month price target for the stock to $400 from $250.

Morgan Stanley’s love note got passed around on Monday and helped drive a 10% bump in Tesla’s share price. Mind you, this AI-fueled hopefulness about Tesla isn’t unfounded: Elon Musk is all about the technology and says his EV maker will plow more than $1 billion into the AI project over the next year.

But, there are also reasons to think twice about jumping into Tesla’s shares headfirst. For one, Morgan Stanley has a history of making dramatic changes to its outlook based on Tesla’s potential in the self-driving space (which has still not materialized). And that over-optimism is pretty clear from this chart: it shows that Tesla’s shares have rarely lived up to Morgan Stanley’s targets in recent years.

And for a bit more context, consider this: the average price target among analysts tracked by Bloomberg is around $270 – well shy of Morgan Stanley’s $400.

Look, there’s surely potential here, and Tesla’s stock could be undervalued based on these assumptions. What’s more, the picture could change (and get clearer) in the next few months: the next version of Tesla’s full self-driving system is due out at the end of the year, after all. But, for now, jumping in purely off the back of this call might not be the best move. If you’re looking for a slice of the pie, it’s worth viewing this as one part of the whole Tesla picture.

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