Tesla (TSLA) stock received an upgrade and a 60% price target hike on September 11, on the calculation that its Full-Self Driving (FSD) supercomputer can boost the EV giant’s value by a half-trillion dollars.

Morgan Stanley’s Adam Jonas upgraded TSLA stock to overweight, raising his price target to 400. In the 40-page report, Jonas wrote Tesla’s Dojo, the supercomputer built to train the company’s FSD technology, could play a key role in raising the company’s valuation as much as $500 billion. Jonas also wrote that Tesla stock is Morgan Stanley’s “top pick.”

“The more we looked at Dojo, the more we realized the potential for underappreciated value in the stock. Like many other large-cap tech stocks on your screen, we believe Tesla can reasonably test its all-time highs of $400 over the next 12 months,” Jonas wrote Sunday.

The Morgan Stanley analyst added that the firm’s bull case valuation is raised to 550, vs. 450, and the bear case valuation increased to 120, up from 90. Jonas wrote these valuation cases express the potential of Dojo, optimism around Tesla’s autonomous robotaxis and Tesla’s network services segment.

“Almost all of Tesla’s value long-term will be from AI & robots, both vehicle & humanoid,” Tesla Chief Executive Elon Musk posted on X, formerly Twitter, on September 11.

The upgrade from Morgan Stanley comes as Tesla stock has ended a three-week slide that saw TSLA pull back after second-quarter financials on July 19.

Meanwhile, the global EV giant is keeping the pedal down on the price war, launching its revamped version of the Model 3 in China as buzz surrounding the updated vehicle and the start of Cybertruck deliveries has propelled Tesla stock towards a potential buy point.

Stock Falls After Earnings

Tesla reported Q2 profits growing 20% to 91 cents per share while revenue increased 47% to $24.93 billion. Analysts expected profits to edge up around 4% to 80 cents per share with revenue totaling $24.22 billion, up 43% compared with last year.

Tesla’s total gross profit grew 7% to $4.53 billion in the second quarter. Meanwhile, total gross margins came in at 18.2%, down from 19.3% in Q1 and a decline of 682 basis points vs. last year. Auto gross margins, excluding regulatory credits and leases, came in at 18.1%, down from 18.3% in Q1.

That is below the 20% gross margin “floor” Tesla previously targeted. Ahead of earnings, a slew of analysts rang warning bells on gross margins.

“The short-term variances in gross margins and profitability really are minor relative to the long term picture,” Musk told investors during the Q2 earnings call.

“Autonomy will make all of these numbers look silly,” he added of the profit margins.

On July 20, TSLA tumbled 9.7% to 262.90, falling below the 21-day line but only giving up July gains.

Ahead of earnings, Cathie Wood sold tranches of her firm’s Tesla stock holdings in consecutive sessions, unloading more than 73,000 shares before the EV giant reported second-quarter financials.

Wood sold another 20,700 shares of Tesla stock on July 25 for around $5.49 million, based on the closing price of 265.28.

Meanwhile, Tesla announced on August 7 that Chief Financial Officer Zachary Kirkhorn is stepping down. The EV giant announced in federal filings that Vaibhav Taneja took over from Kirkhorn on Aug. 4. Taneja will now serve as CFO as well as his current role of chief accounting officer.

“During his tenure, Tesla has seen tremendous expansion and growth,” the company wrote in the SEC filing. “Tesla thanks Mr. Kirkhorn for his significant contributions.”

Tesla Stock And Musk

There is never a dull moment for Tesla and Musk, with the two inextricably linked. Since Musk took over Twitter on Oct. 28, purchasing the social media platform for $44 billion, some longtime Tesla stock bulls have worried Musk’s focus on Twitter, along with negative attention, is weighing down Tesla stock.

Musk appeared to lessen those fears when he hired Linda Yaccarino, NBCUniversal’s advertising chief, as the new CEO for X Corp., formerly known as Twitter. The Tesla chief added Yaccarino will focus on business operations while he will work on product design and new technology.

At the time, Wedbush analyst Dan Ives wrote the news ends some of the “distraction risk around the Tesla story.”

With TSLA shares gaining ground again after sliding on Q2 earnings, the top question for investors is always, when is it a good time to buy or sell Tesla stock.

Tesla and Musk are betting big on the Cybertruck and autonomous vehicle technology, along with a possible tailwind from the Inflation Reduction Act.

Tesla A Monster Stock Over Much Of Its History

Almost single-handedly, Musk has turned the auto industry on its head, essentially forcing it to get aboard the electric-vehicle train.

It’s a reason why Tesla has been a monster stock over much of its history, especially during its stratospheric run from mid-2019 to late 2021. The stock hit a bear market low of 101.84 on Jan. 6, but roared back until Q1 earnings.

On April 19, Tesla reported a big first-quarter earnings decline while revenue missed views. Profit margins for the global EV giant also fell below 20% as the company executed an aggressive price-slashing strategy in the first part of 2023.

Tesla reported revenue increasing 24% to $23.33 billion with EPS of 85 cents, a 20% decline compared to 2022.

The EV company’s total gross profit came in at $4.5 billion, with Tesla’s profit gross margin at 19.3%, down from 23.8% in Q4 and 29.1% a year earlier.

Tesla’s Global Price Cutting Strategy

Tesla has slashed prices worldwide multiple times in 2023, starting in January and continuing into April. The only exception has been China, where Tesla cut prices significantly in late October before reductions in early January.

However, now the new Model 3 is on pre-sale in China with prices starting at about $35,850, 12% more vs. the old version. Deliveries are expected to begin in Q4. The new Model 3 will go on sale in Europe in October.

Meanwhile, in the U.S. Tesla has removed its standard range Model S and Model X versions in the U.S. and dropped the price of the Model X all-wheel drive version below $80,000. This now makes the Model X eligible for the federal $7,500 tax credit under the Inflation Reduction Act (IRA), confirmed by the Internal Revenue Service on September 6.

Ahead of releasing the revamped Model 3 in China, Tesla on August 13 cut prices on two Model Y vehicle trims and began offering a limited-time insurance subsidy for the older Model 3.

On August 16, Tesla fired another shot in the EV price war, nearly doubling discounts on its luxury Model S and Model X vehicles in China.

Earlier in the year, Tesla reduced prices in several European markets. Tesla also dropped the price of its electric vehicles in Israel and Singapore in order to increase demand, expanding a worldwide discount push that began in China in January.

Tesla Stock: Betting On Autonomous Vehicles And The Cybertruck

Musk has long touted Tesla’s Full-Self Driving technology and the potential value it brings to the brand.

Reports have emerged Tesla has started rolling out its FSD beta for new vehicles equipped with Hardware 4, the company’s newest computer system that contains more ports for data-collecting cameras.

The move comes after Elon Musk live-streamed 45-minutes of himself on Aug. 25 using “FSD v12 beta” to drive around Palo Alto. Musk had to make an “intervention” one time during the drive, when his vehicle tried to run a red light.

On Sept. 1, Tesla reduced the price of FSD in the U.S. to $12,000, down from $15,000.

Meanwhile, on Aug. 24 Reuters reported that the National Highway Traffic Safety Administration (NHTSA) says it’s close to ending its two-year long investigation of Tesla’s driver-assist systems Autopilot and Full-Self Driving.

However it’s unclear if NHTSA regulators will take significant action against the EV giant.

NHTSA in late July sought more information about Tesla’s self-driving monitoring systems, according to reports Tuesday. Specifically, regulators wanted to know more about the “Elon mode,” in which some people, including Musk, have disabled the driver monitoring or alerts while self-driving.

In his livestream FSD ride, Musk frequently looked at his phone, but got no nags to pay attention to the road.

Cybertruck Hype

Meanwhile, a Cybertruck delivery event is expected to take place before the end of 2023. Tesla seems to be producing at least a few Cybertrucks a day at its Austin plant. The Cybertruck will be the EV maker’s first new passenger vehicle since the Model Y launched in early 2020. Tesla observers in late August estimate initial Cybertruck production at Gigafactory Texas to be around 100 units.

However, Tesla still hasn’t released prices or key specs that would affect Cybertruck demand and profitability. It’s still unclear how close Tesla is to mass production, or even if it’s settled on a final production model.

Elon Musk said during the Q2 earnings call that Tesla would hold a Cybertruck delivery event before year-end, but has since hedged.

“It is an extremely difficult product to build,” Musk recently wrote on X, formerly called Twitter. “We are in uncharted territory, because it is not like anything else.”

On July 15, Tesla tweeted a photo of the first Tesla Cybertruck made at its Austin plant. Tesla stock responded jumping 3.2%.

The company also said it continues to “make progress” on its next generation platform. Since the Tesla investor day in early March, the company has remained  mostly silent on its next generation vehicle, which has been said will be produced at its new plant in Mexico. At the annual shareholder meeting, Tesla teased a vehicle silhouette.

The Long-Awaited Semi Hauler Unveiled

In early December, Tesla unveiled its long-awaited Semi, an 18-wheel, long-haul electric freight truck, five years after it was first announced. However, in March, Tesla ordered a voluntary recall of 35 Semi trucks due to a parking brake issue.

Tesla began delivering its long-haul Semi trucks to PepsiCo (PEP) in December. Further, Musk has indicated there are plans to build out a charging network for long-haul trucks.

Musk did not specify how much the eighteen-wheeler costs. The Semi is capable of traveling an estimated 500 miles per charge. It can accelerate from zero to 60 in 20 seconds, Tesla says. The company expects to ramp production over the next year and aims to deliver 50,000 units in 2024.

Before the recall, PepsiCo planned to deploy 36 Tesla Semi trucks, with 15 in Modesto and 21 in Sacramento.

Pepsi placed its order for 100 EVs when the Semi was first announced in 2017.

Tesla is currently under investigation by National Highway Traffic Safety Administration over possible seat belt failures. Regulators are also probing the EV giant over steering-wheel issues and driver-assistance concerns.

Is Tesla Stock A Buy?

Tesla stock has forged a new base with a proper buy point at 299.29, according to MarketSmith. Shares are up around 5% this month, following a September 11 surge.

TSLA veered lower on September 1, dropping 5.1% to 245.01, sending shares back below their 50-day moving average and to their 21-day line. Since then, Tesla stock has moved above its August 31 high of 261.18, an early entry for aggressive investors.

Tesla stock ranks third in the 35-stock IBD automaker industry group. The S&P 500 component has a 96 Composite Rating out of 99. Tesla stock has an 91 Relative Strength Rating and its EPS Rating is 93 out of 99.

The market status is showing an “uptrend under pressure.” Tesla stock is actionable from an early entry of 261.18, just above the 50-day line.

Please follow Kit Norton on Twitter @KitNorton for more coverage.


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