Tesla Inc: Morgan Stanley remains Overweight, looks past Musk-Trump feud

Morgan Stanley remains Overweight on Tesla with a $410 price target, despite recent stock declines driven by CEO Elon Musk's public feud with President Trump and its potential impact on demand. While acknowledging near-term volatility and the risk of alienating customers due to increased political attention, Morgan Stanley believes Tesla's long-term value drivers, including AI leadership, autonomy, and manufacturing capabilities, remain intact and largely apolitical, outweighing concerns about the phasing out of electric vehicle tax credits.

Analysis

Morgan Stanley maintains an Overweight rating on Tesla, Inc. (TSLA) with a $410 price target, signaling a potential 39% upside from its recent closing price, despite significant near-term challenges. The stock experienced a substantial decline of nearly 15% in the preceding week, attributed to a public dispute between CEO Elon Musk and U.S. President Donald Trump, which has now reportedly seen a softening in rhetoric; this follows Musk’s departure from a White House role in late-May. Morgan Stanley posits that the phasing out of electric vehicle tax credits, a contentious element in Trump's tax bill harshly criticized by Musk, is not material to Tesla's long-term prospects. The firm notes that previous stock surges, including a rally over 50%, were linked to Musk's commitment to focus more on Tesla and less on governmental affairs, highlighting market sensitivity to his involvement. However, Morgan Stanley acknowledges that increased political attention could "temporarily alienate" customers and exacerbate existing demand pressures, which have already seen Tesla's sales plummet in recent quarters due to consumer backlash, heightened competition from rivals like BYD, and an aging EV product line. Notwithstanding these headwinds and a 22.2% loss so far in 2025, Morgan Stanley underscores Tesla’s enduring long-term value driven by its leadership in AI, autonomy, robotics, advanced manufacturing, supply chain innovation, and renewable energy infrastructure, which they view as "largely apolitical." While anticipating continued near-term stock volatility and the possibility of further declines, the brokerage believes these fundamental strengths underpin Tesla's positive long-term outlook.

Key Decisions for Investors

• Investors should anticipate continued share price volatility for Tesla in the near term, stemming from political discourse involving its CEO and ongoing demand pressures highlighted by Morgan Stanley.
• Despite current headwinds, long-term oriented investors might consider Morgan Stanley's thesis that Tesla's core technological advantages in AI, autonomy, and manufacturing remain intact and are key to its future valuation, potentially justifying the Overweight rating.
• It is crucial to monitor shifts in customer sentiment resulting from political entanglements, alongside the competitive landscape and Tesla's ability to refresh its EV lineup to address recent sales declines and consumer backlash.