TLDR
- Morgan Stanley analyst Adam Jonas reinstated Tesla as a top pick with $430 price target, citing AI and robotics potential
- Tesla’s February sales in China dropped 49% year-over-year, hitting lowest monthly total in over two years
- Stock has lost nearly a third of its value since peaking at $480 in December
- Musk’s political involvement with the Trump administration may be alienating Tesla’s traditionally left-leaning customer base
- New tariffs on Mexican and Canadian imports could impact Tesla’s supply chain and profitability
Tesla’s stock has experienced a rollercoaster ride in recent months, with significant downward pressure despite bullish analyst forecasts. The electric vehicle maker has seen its shares plummet amid slowing sales, CEO Elon Musk’s deepening political involvement, and the company’s strategic pivot toward artificial intelligence and robotics.
Morgan Stanley analyst Adam Jonas made headlines by reinstating Tesla as a top pick in the auto sector. He set a price target of $430, representing potential upside of nearly 50% from recent trading levels.
Jonas predicts Tesla’s full-year 2025 deliveries could actually decline year over year. However, he views this as “creating an attractive entry point” for investors interested in the company’s long-term potential.
The analyst’s bull case for Tesla reaches as high as $800 per share. This optimistic outlook stems from Tesla’s transition “from an automotive ‘pure play’ to a highly diversified play on AI and robotics.”
Jonas isn’t alone in his bullish stance. Wedbush analyst Dan Ives maintained his Outperform rating and $500+ price target despite ongoing concerns about Musk’s political activities.
Recent data from China presents a more troubling picture for Tesla’s core automotive business. According to the China Passenger Car Association, Tesla’s February wholesale numbers dropped 49% year-over-year.
The company sold just 30,688 new energy vehicles in China during February. This marks Tesla’s lowest monthly total in over two years in the crucial Chinese market.
By comparison, Chinese EV maker BYD dominated with 318,233 sales during the same period. The gap between the two companies continues to widen as local competitors gain market share.
European sales plummeted 45% in January
Tesla’s European performance is equally concerning. January sales in Europe reportedly plummeted 45%, while the overall industry saw a 37% increase according to Bloomberg.
The company’s fourth-quarter financial results disappointed investors. Both earnings and revenue missed analysts’ estimates, with automotive revenue falling 8% to $19.8 billion year over year.
Operating income declined by 23% to $1.6 billion. Tesla attributed this largely to lower average selling prices across its vehicle lineup.
Elon Musk’s deepening involvement in politics may be contributing to Tesla’s sales challenges. As a close ally of President Trump who now leads the Department of Government Efficiency (DOGE), Musk’s political activities could be alienating Tesla’s traditionally left-leaning, environmentally conscious customer base.
Recent polls suggest public skepticism about Musk’s government role. A January Quinnipiac poll found that voters oppose Musk playing a prominent role in the Trump administration by a 53% to 39% margin.
Protests at Tesla showrooms across the country in February highlighted the growing backlash. These demonstrations, along with criticism of government worker firings led by Musk’s DOGE initiative, have intensified scrutiny of the CEO’s dual roles.
Tariff policies present another challenge
New tariff policies present another challenge for Tesla. A 25% tariff on Mexican and Canadian imports took effect on March 4th, potentially impacting Tesla’s supply chain costs.
Several of Tesla’s key suppliers operate in these countries. UBS noted that the market hadn’t fully priced in these tariffs, expecting “a potential last-minute deal between the countries, which hasn’t happened.”
Bank of America has responded to these challenges by lowering its price target on Tesla to $380 from $490. The firm maintained a neutral rating while citing multiple concerns about the company’s outlook.
Despite these headwinds, Morgan Stanley maintains that Tesla’s core opportunity lies beyond traditional automotive sales. Jonas argues that “the commercial opportunity of non-auto expressions of embodied AI is likely far larger and faster-adopting than that of autonomous cars.”
Tesla is scheduled to report its first quarter results on April 22nd. Investors will be watching closely for signs of whether the company’s AI and robotics strategy can offset weakening automotive sales performance.
Tesla stock has surrendered nearly all of its 40% post-election gain. After hitting a closing high of $479.86 in mid-December, the shares now trade around $274, reflecting investor uncertainty about the company’s near-term prospects.
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