Morgan Stanley has replaced Ford and advanced Tesla to its “Top Pick” in the autos sector for the US. Analysts forecast an upside of 40% and expect a target price $310, due to several factors that drive more managed expectations and firm value on autos.
A big reason for the new status is Tesla ’s effective restructuring and cost-cutting efforts. Tesla ’s Q2 results aligned closely with expectations and exceeded Morgan Stanley’s forecasts when excluding regulatory credits and restructuring charges.
The bank said that with more than $0.6B in restructuring charges recognized, Tesla has decreased its breakeven point, and this enabled positive cash flow even with last quarter’s 69% EV capacity utilization. What also stood out to Morgan Stanley was Tesla ’s strategic redirection of resources away from auto manufacturing.
Another key factor was Tesla ’s dominance in the ZEV (zero emission vehicle) credit market. Tesla reported ZEV credit revenue of about $2,000 per vehicle, more than twice the recent run-rate.
As EPA standards tighten and legacy automakers scale back on EV plans, Morgan Stanley expects a strengthening of Tesla ’s market position for lucrative ZEV credits.
Morgan Stanley also underlined Tesla ’s effective management of Chinese risks exposure, with 18.2% China-sourced revenues in Q2 2024. The number will likely drop systematically, and in 2030 reach about 10%.
