Banking giant says Trump v. Musk spat ‘likely planned strategy,' updates TSLA target

Morgan Stanley analysts suggest Elon Musk's recent public dispute with Donald Trump was a calculated strategy, despite initially causing a 14% drop in Tesla's stock and $150 billion loss in market value. Despite the turmoil, Morgan Stanley reaffirmed Tesla as its top pick in the U.S. auto sector, raising its price target to $410 and maintaining an 'Overweight' rating, citing Tesla's leadership in AI and upcoming robotaxi launch as major catalysts. While acknowledging potential negative sentiment from Musk's political involvement, the firm believes Tesla's leadership is aware of these risks, though not all analysts share this bullish outlook, with Baird recently downgrading TSLA to 'Neutral'.

Analysis

Morgan Stanley analysts posit that the recent public confrontation between Tesla CEO Elon Musk and former President Donald Trump, which initially precipitated a 14% decline in Tesla's shares and a $150 billion market capitalization loss in a single day, was a calculated strategic maneuver by Musk. Despite this volatility, which saw Tesla's stock subsequently rebound to $320.07 (up nearly 4% at press time), Morgan Stanley reaffirmed Tesla as its 'top pick' in the U.S. auto sector, maintaining an 'Overweight' rating and increasing its price target from $400 to $410. The investment bank attributes this bullish stance to Tesla's perceived leadership in physical artificial intelligence, encompassing autonomous vehicles, robotics, energy, and computing, and highlights the upcoming robotaxi launch in Austin on June 12 as a significant catalyst. Morgan Stanley acknowledges that Musk's political engagement is now an integral part of Tesla's investment narrative and, while potentially stirring negative sentiment, believes Tesla's leadership is cognizant of these risks, viewing Musk's focus on U.S. fiscal issues as a strategic priority. This optimistic outlook is not universally shared, as evidenced by Baird's Ben Kallo, who recently downgraded Tesla from 'Outperform' to 'Neutral' with a $320 price target, citing concerns over the aggressive timeline for the robotaxi rollout.

Key Decisions for Investors

• Investors should consider Morgan Stanley's reinforced bullish outlook and $410 price target for Tesla, driven by perceived AI leadership and the upcoming robotaxi launch, while also noting the counterpoint from Baird's recent downgrade to 'Neutral' with a $320 target due to execution concerns.
• The Tesla robotaxi launch scheduled for June 12 in Austin represents a key near-term catalyst that warrants close observation, as its success or perceived progress could significantly impact investor sentiment and share price.
• Evaluate exposure to Tesla in light of Elon Musk's political activism, which Morgan Stanley views as strategically embedded but also a source of potential brand perception risk and regulatory uncertainty, against the company's technological innovation and market position.