Tesla Remains Morgan Stanley's Top US Auto Pick Despite Stock Slump, But Retail Rejects AI Hype And Musk’s Pitch

Analysts suggested that Tesla's 2025 deliveries could decline annually but saw this as an "attractive entry point" into their "preferred embodied AI name."

Morgan Stanley has once again named Tesla, Inc. its "Top Pick" among U.S. automakers, arguing that the stock's nearly 30% decline this year reflects a "clear buyers' strike." 

Analysts led by Adam Jonas maintained an 'Overweight' rating and a $430 price target on the stock on Monday despite growing concerns over weak car deliveries and declining market share.

The firm pointed to a Bloomberg report indicating that Tesla's January sales in Europe fell 45% year-over-year, even as overall EV sales in the region climbed 37%. 

Morgan Stanley suggested that Tesla's 2025 deliveries could decline annually but saw this as an "attractive entry point" into their "preferred embodied AI name."

"Tesla's YTD auto deliveries have been mostly below expectations, but not particularly narrative-changing," the research firm said. "Tesla's softer auto deliveries are emblematic of a company transitioning from an automotive pure play to a highly diversified bet on AI and robotics."

Among the key reasons supporting its bullish thesis are Tesla's artificial intelligence (AI) and autonomy prospects, its push into energy storage, and its growing services and software business.

However, Morgan Stanley warned that high expectations around Tesla's Full Self-Driving (FSD) and robotaxi ambitions could be premature, especially given regulatory hurdles. 

The research firm also cited risks tied to prolonged EV market weakness, commercialization challenges in China, and CEO Elon Musk's efforts to secure greater control over Tesla's AI strategy. 

The analysts' comments came just a day after Musk claimed that Tesla's profits could rise by 1,000% over the next five years, assuming "outstanding execution."

He has repeatedly insisted that Tesla's long-term value extends far beyond automobiles, citing future revenue from humanoid robots and AI-powered self-driving technology.

Retail traders, however, remain skeptical. On Stocktwits, sentiment for Tesla sank deeper into 'extremely bearish' territory even as message volume increased on Monday. 

One user pointed out that Tesla has half the profits of Volkswagen but trades at a valuation "twenty times more," calling it "the biggest bubble of all time." 

Another predicted that Tesla would soon dip below $200, citing growing competition from Chinese EV makers with "cheaper cars and better technology."

According to Koyfin data, Tesla shares are currently trading about 21% below analysts' average price target of $345.56. 

Among the 47 Wall Street analysts covering the stock, 20 have a 'buy' or 'strong buy' rating, 15 rate it 'hold,' and 12 have assigned a 'sell' or 'strong sell' rating. 

Tesla stock fell 2.8% on Monday and fell further in after-hours trading.

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