Morgan Stanley auto analyst names Tesla his top pick, sees 40% upside

Tesla has stemmed downside risk in its electric vehicle business and is exposed to “powerful emerging drivers” related to artificial intelligence and future energy demand, leaving it a better bet than Ford as the best stock in the auto industry, according to Morgan Stanley. Analyst Adam Jonas has a $310 price target for Tesla, implying 40% upside from Friday’s close of $219.80. Tesla’s cost cutting and restructuring has helped lower the breakeven point at which it can generate positive cash flow, Jonas wrote. The Elon Musk-led company is also benefiting from zero emission credits that amount to $2,000 per vehicle, the analyst said. “We believe as more legacy [original equipment manufacturers] pull back on their EV plans, combined with increasingly stringent EPA standards, that Tesla may achieve an even more dominant position in the market for highly lucrative ZEV credits going forward,” Jonas told clients. The automaker also has a strong position in the energy storage market, with investors starting to consider that Tesla may benefit from a historic increase in electricity demand, according to the analyst. And Tesla is also at the “epicenter” of the artificial intelligence revolution, with the commercial opportunities in intelligent robots, or embodied AI, likely “far larger and faster-adopting than that of autonomous cars,” Jonas said.