Morgan Stanley remains to be bullish on Tesla’s (TSLA) long-term story, nevertheless it doesn’t suppose buyers ought to ignore the messy center.
Tesla launched its Q1 2026 earnings report on Wednesday, April 22, 2026, to a combined response, although the numbers appeared good on the floor.
In accordance with Seeking Alpharevenues shot up $22.4 billion, blowing previous the $21.1 billion consensus, whereas adjusted EPS got here in at 41 cents, above the 30-cent estimate.
On prime of that, free cash flow was stunning at $1.4 billion.
Nevertheless, the standard of the beat mattered.
Auto gross margins have been boosted by a large $230 million launch of the guarantee reserve, whereas vitality margins obtained a good bigger $250 million tariff rebate.
Consequently, the financial institution reiterated its equal-weight score and $415 worth goal on Tesla. With shares not too long ago buying and selling within the $375 to $380 vary, that suggests roughly 9% to 11% upside.
To that time, the larger situation with the corporate’s near-term positioning is that its future companies nonetheless look much more like future companies.
Robotaxi rollouts are shifting way more slowly than anticipated, and unsupervised FSD is unlikely to start till late 2026.
On the identical time, Tesla’s capex steering surged to $25 billion, which raises the price of chasing that future.
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Tesla inventory returned -3.24% over one week, in contrast with the S&P 500’s 1.76% return.
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Tesla inventory returned -1.19% over one month, in contrast with the S&P 500’s 8.88% return.
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Tesla inventory returned -16.19% over six months, in contrast with the S&P 500’s 6.33% return.
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Tesla inventory returned -16.33% 12 months so far, in contrast with the S&P 500’s 4.67% return.
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Tesla inventory returned 50.08% over one 12 months, in contrast with the S&P 500’s 33.28% return.
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Tesla inventory returned 127.95% over three years, in contrast with the S&P 500’s 73.34% return.
Supply: In search of Alpha
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Base case: $415 worth goal. Morgan Stanley’s base case doesn’t deal with Tesla as a easy automotive firm. It assigns solely $45 a share for its core EV enterprise, forecasting that almost all of its worth comes from future companies together with software program, Robotaxi, vitality, and Optimus.
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Bull case: $826. That is the model the place “every thing works.” Tesla is ready to promote way more vehicles, publish stronger margins, and proceed constructing an unlimited Robotaxi fleet, together with rising vitality and Optimus companies.
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Bear case: $131. That is what occurs if Tesla stays depending on autos and its newer companies fail to create worth.
Morgan Stanley didn’t dismiss Tesla’s quarter outright, however warned about it being a read-through for the remainder of the 12 months.
A giant a part of it was Tesla’s auto margins getting a bump from one-offs. Nevertheless, to be truthful, if we low cost the credit from auto margins, they nonetheless nudged forward of Morgan Stanley’s 340-basis-point estimate.
Extra Tesla:
The vitality companies gave the impression to be one other silver lining, however that, too, got here with an asterisk.
Power gross margins beat the financial institution’s 1,350 basis point estimate and consensus by 1,150 foundation factors, helped by $250 million in tariff rebates. If we exclude that, although, the section nonetheless stands by a much smaller 315 foundation factors versus the Morgan Stanley estimate.
Morgan Stanley’s rationale breaks down into three core areas:
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The beat had high quality questions. One-time gadgets helped beat margins, whereas Tesla’s administration talked about strain from competitors and tariffs.
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The spending cycle is getting larger. Capex steering surged by $5 billion to greater than $25 billion, in keeping with To gasolineand Morgan Stanley now fashions $26.1 billion in capex and $11.6 billion in free money circulate burn.
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The AI timeline is slower. Robotaxi miles are up greater than 2.5 occasions since December, however Musk mentioned “rigorous validation” is the limiting issue. On the identical time, unsupervised FSD might begin in This fall, and three.5 million HW3 autos could also be left behind.
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Wedbush has a worth goal of $600 for Tesla inventory, To gasoline signifies.
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Cantor Fitzgerald has a worth goal of $510 for Tesla inventory, in keeping with Barron’s.
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Stifel has a worth goal of $508 for Tesla inventory, Investing.com confirms.
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RBC Capital has a worth goal of $475 for Tesla inventory, TipRanks notes.
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Canaccord Genuity has a worth goal of $450 for Tesla inventory, in keeping with Investing.com.
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UBS has a worth goal of $364 for Tesla inventory, MarketScreener confirms.
Tesla’s greatest threat now could be that its future retains feeling farther away.
The financial institution nonetheless validates its long-term bodily AI story, however clearly, the near-term setup is messy.
The EV big is spending a ton, with 2026 capex already anticipated to prime $25 billion, whereas Robotaxi and Optimus commercialization are arriving a lot slower than buyers had hoped.
In the meantime, Tesla’s valuation is already giving the corporate credit score for companies that aren’t totally scaled but.
For context, Tesla inventory is buying and selling at an eye-watering 179 occasions ahead earnings, 54% above its 5-year common, in keeping with Seeking Alpha.
Tesla trades at 14.6 occasions ahead gross sales, a 507% premium to the sector median.
On prime of that, Robotaxi enlargement is linked to “rigorous validation,” and it is a huge bummer that its HW3 autos do not assist unsupervised FSD.
Throw within the potential margin points linked to tariffs, competitors, and uneven vitality storage demand, together with rising free money circulate burn, and issues get much more difficult.
Related: Fidelity sends blunt message on S&P 500 after sudden rebound
This story was initially printed by TheStreet on Apr 25, 2026, the place it first appeared within the Investing part. Add TheStreet as a Preferred Source by clicking here.
