Morgan Stanley continues to be bullish on Tesla’s (TSLA) long-term story, however it doesn’t assume traders ought to ignore the messy center.
Tesla launched its Q1 2026 earnings report on Wednesday, April 22, 2026, to a blended response, although the numbers regarded good on the floor.
In keeping with In search of Alpha, revenues 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 high of that, free money circulation was stunning at $1.4 billion.
Nevertheless, the standard of the beat mattered.
Auto gross margins had been boosted by an enormous $230 million launch of the guarantee reserve, whereas vitality margins acquired a good bigger $250 million tariff rebate.
Consequently, the financial institution reiterated its equal-weight ranking and $415 value goal on Tesla. With shares just lately buying and selling within the $375 to $380 vary, that suggests roughly 9% to 11% upside.
To that time, the larger subject 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 similar time, Tesla’s capex steerage surged to $25 billion, which raises the price of chasing that future.
Tesla inventory returns vs. the S&P 500
- Tesla inventory returned -3.24% over one week, in contrast with the S&P 500’s 1.76% return.
- Tesla inventory returned -1.19% over one month, in contrast with the S&P 500’s 8.88% return.
- Tesla inventory returned -16.19% over six months, in contrast with the S&P 500’s 6.33% return.
- Tesla inventory returned -16.33% 12 months thus far, in contrast with the S&P 500’s 4.67% return.
- Tesla inventory returned 50.08% over one 12 months, in contrast with the S&P 500’s 33.28% return.
- Tesla inventory returned 127.95% over three years, in contrast with the S&P 500’s 73.34% return.
Supply: In search of Alpha
Morgan Stanley maps Tesla’s wide selection of outcomes
- Base case: $415 value 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.
- Bull case: $826. That is the model the place “everything works.” Tesla is ready to promote much more automobiles, submit stronger margins, and proceed constructing an infinite Robotaxi fleet, together with rising vitality and Optimus companies.
- Bear case: $131. That is what occurs if Tesla stays depending on autos and its newer companies fail to create worth.
Tesla earnings beat expectations, however Morgan Stanley warns rising prices and slower AI rollout might cap upside.
SMIALOWSKI/AFP through Getty Photos
Morgan Stanley sees a stronger Tesla, however a slower payoff
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 honest, if we low cost the credit from auto margins, they nonetheless nudged forward of Morgan Stanley’s 340-basis-point estimate.
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The vitality companies gave the impression to be one other silver lining, however that, too, got here with an asterisk.
Vitality gross margins beat the financial institution’s 1,350 foundation level estimate and consensus by 1,150 foundation factors, helped by $250 million in tariff rebates. If we exclude that, although, the phase nonetheless stands by a much smaller 315 foundation factors versus the Morgan Stanley estimate.
Morgan Stanley’s rationale breaks down into three core areas:
- The beat had high quality questions. One-time gadgets helped beat margins, whereas Tesla’s administration talked about strain from competitors and tariffs.
- The spending cycle is getting larger. Capex steerage surged by $5 billion to greater than $25 billion, based on Benzinga, and Morgan Stanley now fashions $26.1 billion in capex and $11.6 billion in free money circulation burn.
- The AI timeline is slower. Robotaxi miles are up greater than 2.5 instances since December, however Musk stated “rigorous validation” is the limiting issue. On the similar time, unsupervised FSD might begin in This fall, and three.5 million HW3 automobiles could also be left behind.
Wall Avenue value targets for Tesla inventory after Q1 2026 earnings
- Wedbush has a value goal of $600 for Tesla inventory, Benzinga signifies.
- Cantor Fitzgerald has a value goal of $510 for Tesla inventory, based on Barron’s.
- Stifel has a value goal of $508 for Tesla inventory, Investing.com confirms.
- RBC Capital has a value goal of $475 for Tesla inventory, TipRanks notes.
- Canaccord Genuity has a value goal of $450 for Tesla inventory, based on Investing.com.
- UBS has a value goal of $364 for Tesla inventory, MarketScreener confirms.
Dangers to the Morgan Stanley Tesla thesis
Tesla’s largest danger 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 high $25 billion, whereas Robotaxi and Optimus commercialization are arriving a lot slower than traders 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 instances ahead earnings, 54% above its 5-year common, based on In search of Alpha.
Tesla trades at 14.6 instances ahead gross sales, a 507% premium to the sector median.
On high of that, Robotaxi growth is linked to “rigorous validation,” and it is a huge bummer that its HW3 automobiles do not help unsupervised FSD.
Throw within the potential margin points linked to tariffs, competitors, and uneven vitality storage demand, together with rising free money circulation burn, and issues get much more sophisticated.
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