Morgan Stanley Calls for 300% Rally in Tesla Stock. Time to Buy?

The “Trump rally” is gone for Tesla (NASDAQ:TSLA). After nearly doubling in value between Nov. 5 and Dec. 17 to hit $488 per share and give the electric vehicle maker a $1.6 trillion market cap, TSLA stock has lost more than half its value.

Fueled by Elon Musk’s close ties to Trump and expectations that his influence could fast-track autonomous driving regulations and shield Tesla from foreign competition via tariffs, the widening trade war between the U.S. and its trading partners sucked the wind from the EV maker’s sails and the stock crashed.

Yet in a striking forecast, Morgan Stanley (NYSE:MS) analyst Adam Jonas just predicted that Tesla could soar again, this time to an incredible $800 per share within the next 12 months. It might not be as exuberant as investing guru Cathie Wood’s call for TSLA stock to hit $2,600 by 2029, but it would still be a massive 260% rally from where it traded before the analysis was released. 

With the stock reeling from weak sales and brand backlash, Morgan Stanley’s optimism creates a quandary for investors: is this a compelling reason to buy TSLA now, or a speculative leap too far?

Stuck in neutral

Tesla’s stock soared post-election reflecting investor euphoria over CEO Elon Musk’s role in Trump’s Department of Government Efficiency (DOGE) and potential policy wins. But the rally fizzled in early 2025 as realities set in: Tesla’s fourth-quarter deliveries of 495,600 vehicles was down 5.5% from the year ago period and 2.2% fewer sequentially. It marked the first time Tesla didn’t post year-over-year growth. 

European sales also tanked and a widening partisan divide as Trump critics shunned the brand eroded sentiment. With lower demand for EVs overall, TSLA stock erased all of the Trump-driven gains.

Morgan Stanley’s bull case

Jonas sees this pullback as a golden entry point, dubbing Tesla an “embodied AI compounder” transitioning from a carmaker to a diversified tech titan. His $800 bull case hinges on three pillars: AI and autonomy breakthroughs, energy sector expansion, and Tesla’s robotaxi potential. He envisions a 2030 fleet logging a billion daily miles, with 7.5 million robotaxis by 2040 generating $1.46 per passenger mile at a 29% EBITDA margin. 

Upcoming catalysts, including Tesla’s robotaxi reveal and AI/Humanoid Day later this year, could reignite investor fervor. His base case is $430, but the $800 ceiling reflects a belief that Tesla’s long-term value lies beyond EVs, with software and services dwarfing its auto roots.

Yet, this rosy outlook clashes with stark risks. Tesla’s core business is faltering. China sales dropped 45% in early 2025, and brand “degradation” tied to Musk’s relationship with Trump has alienated Democrats, once the brand’s staunchest allies. Data from Stifel’s Think Tank Group shows their net favorability at -15% from a year ago when it stood at 7% (Republican now have a net favorability of 27% from 11%). 

Financially, Tesla’s cash burn persists. Despite $27 billion in cash, capital expenditures on AI and factories strain margins while competition intensifies. Google’s Waymo, for example, is logging 150,000 weekly paid trips, far outpacing Tesla’s Full Self-Driving (FSD) rollout, which is still “supervised” despite the hype around its Version 13. 

Tesla also faces geopolitical risk as Trump’s tariff plans are inviting retaliation that could hit Tesla’s global supply chain. Morgan Stanley’s Jonas concedes a $200 bear case, or a 10% further drop, if these headwinds dominate.

What’s an investor to do?

For investors, Morgan Stanley’s call is a double-edged sword. The $800 target is tantalizing for its massive growth call. It implies a $2.6 trillion valuation for TSLA stock. Yet it rests on execution Tesla hasn’t yet proven.

Autonomous vehicles remain a regulatory and tech hurdle and FSD’s “six-times improvement” is untested at scale. There is something to be said for Tesla’s AI pivot, but shareholders are beginning to question Musk’s distractions, especially with his work on DOGE. Musk himself says balancing his role at DOGE with running Tesla, X, SpaceX, xAI, and the Boring Company is being done “with great difficulty.”

Risk-tolerant investors might buy now, betting on catalysts to spark a rebound. At TSLA’s current price, even if the stock regains the heights of the Trump election euphoria it would mark substantial returns.  But for most investors, though, waiting makes more sense.

Tesla’s first-quarter earnings are due out in April and can offer clarity on delivery trends and FSD progress. Morgan Stanley’s vision is bold, even outrageous, but Tesla’s near-term headwinds and unproven tech leaps make it a speculative, not definitive, reason to buy TSLA stock today.