Tesla's Stock Decline: A Buying Opportunity or Cause for Concern?

Tesla Inc. (NASDAQ: TSLA) has experienced a sharp decline in its stock price, falling 50% from December highs and down 45% year-to-date. Despite these losses, Morgan Stanley views the downturn as a buying opportunity, citing Tesla's potential as an "embodied AI compounder" poised for long-term growth.

Why Tesla Shares Dropped

1. Disappointing Delivery Data

• Tesla's vehicle deliveries have fallen short of expectations, attributed to:
  • Increased competition in the EV market.
  • An aging vehicle lineup with fewer recent updates.
  • A buyers' strike due to negative sentiment and anticipation of upcoming product releases.

2. Weak European and Chinese Sales

• European Sales: Tesla's January sales fell 45% year-over-year, despite overall European car sales rising 37%.
• China Sales: Tesla's weekly order estimates for late February to early March dropped to 11-13K units — down from 15-17K units the prior week.

Morgan Stanley's Outlook

Despite the weak sales data, Morgan Stanley emphasizes Tesla's potential as a leader in AI-driven innovation and robotics:

Key Catalysts to Watch

1. Robotaxi Unveiling (June-August 2025): Tesla is expected to showcase its autonomous taxi service, which could boost investor confidence.
2. AI/Humanoid Day: Tesla is set to highlight progress on its Optimus humanoid robot, strengthening its position in embodied AI technology.

Stock Price Predictions

• Bear Case: Tesla could fall to $200 in a worst-case scenario.
• Bull Case: Optimistic projections suggest a potential climb to $800 within 12 months.

Investment Takeaway

Morgan Stanley maintains Tesla as its “top pick” in the U.S. auto sector, reinforcing confidence in the company's long-term value as an AI innovation leader. While short-term volatility may persist, Tesla's advancements in autonomous driving, robotics, and energy solutions could fuel substantial growth.

Monitor Tesla's Performance

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