Morgan Stanley sees ‘another volatile, idiosyncratic year’ upcoming for Tesla

Morgan Stanley admits it is “not terribly surprising that auto investors are cautious” on Tesla (TSLA) given increased competition and a lack of high-volume new products in 2024, but he argues that Tesla is “definitely an auto company” and it is “also an AI company.” Looking ahead to 2024, the firm expects “another challenging year for the core auto business” and acknowledges that if all else is equal, continued negative surprises on the auto side should be negative for the stock, but adds that “we’ve learned with Tesla over our years of coverage, all else is rarely equal.” The same forces that have driven AWS to reach 70% of Amazon’s (AMZN) total EBIT can work at Tesla, opening up new addressable markets that extend well beyond selling vehicles at a fixed price, with the catalyst being Dojo, Tesla’s custom supercomputing effort in the works for the past five years, the analyst tells investors. Beyond the core auto business, the firm points to Optimus, Tesla’s AI software, as well as Edge AI and EV infrastructure as areas that may be relevant for the stock in the year ahead. Morgan Stanley keeps an Overweight rating and $380 price target on Tesla shares.