Tesla's (TSLA) Supply Strategy Supports Morgan Stanley's Bullish Outlook

With an unchanged price target of $410, Morgan Stanley analyst Adam Jonas maintained a Buy rating on Tesla Inc. (NASDAQ:TSLA). In his latest note, on May 27, Jonas emphasizes Tesla’s strong execution in overcoming operational hurdles and its solid positioning in the electric vehicle (EV) market.

A key concern raised by Jonas was Tesla’s reliance on advanced technologies, such as permanent magnets, which are heavily dependent on rare earth elements, primarily produced in China. This poses a risk for the company due to China's recent restrictions on the export of rare earth elements, which could lead to disruptions in its supply chain.

In an apparent response to the US-imposed tariffs, China added seven rare-earth minerals to its export control list in April. China now imposes strict licensing requirements to limit their use in military applications.

Despite these challenges, Jonas remains positive on Tesla due to its proactive and flexible approach. The company is collaborating with Chinese authorities to secure export permits and is concurrently exploring alternative sources, while also increasing its investment in domestic LFP (lithium iron phosphate) battery production. These steps aim to secure critical materials and reduce long-term risk.

Tesla’s continued innovation and growing demand for electric vehicles remain key drivers of Jonas’ Buy rating. He believes the company’s adaptability and leadership in clean energy solutions provide a solid foundation to mitigate near-term supply challenges.

Tesla is an EV manufacturer and clean energy company known for its innovative approach to sustainable transportation and energy solutions. It designs, manufactures, and sells electric vehicles, battery energy storage systems, solar products, and related services.

While we acknowledge the potential of TSLA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than TSLA and that has 100x upside potential, check out our report about the cheapest AI stock.

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Disclosure: None.