Tesla shares edged higher in early Monday trading, following a brutal February selloff, after a top Wall Street analyst reiterated his bullish outlook for the stock tied to its AI and robotics potential.
Tesla (TSLA) shares plunged more than 27% last month, shedding more than $375 billion in market value and falling below the $1 trillion threshold, amid a slump in vehicle sales and suspected brand erosion tied to the political activities of CEO Elon Musk.
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European Automobile Manufacturers' Association data published last week showed Tesla's new registrations fell 45% in January, while overall sales from its rivals were up 37%. In China, meanwhile, Tesla is losing share to domestic names such as BYD (BYDDY) and Xiaomi and saw January sales fall 12.1% from a year earlier.
Tesla also faces a series of crosswinds over the coming months, including a removal of key tax incentives for the purchase of new electric vehicles and the potential for new tariff barriers tied to the protectionist trade policies proposed by President Donald Trump.
Morgan Stanley analyst Adam Jonas, however, appeared unfazed by the weakness in Tesla sales, arguing in a note published late Sunday that the slump, which could extend throughout the whole of 2025, creates an "attractive entry point to our preferred embodied AI name."
Slumping Tesla sales
Tesla's year-to-date auto deliveries have been mostly below expectations, but are not particularly narrative-changing," Jonas said. "Softer auto deliveries are emblematic of a company in the transition from an automotive 'pure play' to a highly diversified play on AI and robotics."
He reiterated his 'overweight' rating and $430 price target on Tesla stock, a level that suggests a near 50% gain from current levels over the next 12 months.
Related: As Tesla stock plunges, burning questions surround Elon Musk
Jonas has long advanced the underlying value of tech-focused business. The analyst in fact has argued that Tesla's market value could reach around $1.6 trillion if his bull case for the stock comes to fruition and if Musk's involvement with the new administration enables a repricing of its AI ambitions.
Musk himself touted the profit potential of AI technologies, particularly with respect to the group's ambition to offer self-driving software to its near 7 million global EV fleet.
Tesla's Optimus, a humanoid robot powered by the group's AI technology that the group says will perform repetitive physical tasks, is currently being used in a limited capacity in Tesla's energy-storage division.
AI advances will drive Tesla gains
During Tesla's late-October earnings call, Musk called Optimus "the most advanced humanoid robot by a long shot" and said his was the "only company that really has all of the ingredients necessary to scale humanoid robots."
Jonas argued that over the longer term "every 1% of US labor force that can be captured by Tesla Optimus is worth approximately $100 per Tesla share." The analyst's long-run bull target for Tesla stock is $800 a share.
"As AI moves from the digital world (bits and bytes) to the physical world (atoms and photons), we expect to see Tesla's [total addressable market] aperture further expand to broader domains, many of which are still not included in buy-side or sell-side financial models for the company," Jonas said.
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"While the journey may be volatile and nonlinear ... 2025 will be a year where investors will continue to appreciate and value these existing and nascent industries of embodied AI, where we believe Tesla has established a material competitive advantage," he added.
Tesla shares were marked 3% higher in early Monday trading to change hands at $301.91 each, a move would leave the stock down more than 20% for the year.
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