Analyst Adam Jonas upgraded Tesla to"equal-weight" from"underweight" late Thursday and lifted his price target for the shares to $1,360 from $1,050. The new target implies a 16% decline from the stock's Thursday close.
The bank downgraded Tesla shares in June, citing the stock's meteoric rise and fearing the stock's valuation was"driven by factors beyond the business of selling cars." Yet the company's stock leaped even higher, and the bank now sees Tesla's battery segment justifying at least some of the gains.
The automaker's third-party battery and electric-vehicle powertrain business is now factored into Morgan Stanley's base case and is worth $310 per share, Jonas said. Tesla is"potentially leapfrogging" the competition with its battery technology, he added, and investors will glean more details on its industry lead during the company's September 22 Battery Day.
Tesla already controls roughly half of automotive battery production around the world. That share could expand if Tesla can ramp up its own battery production while implementing new technologies, according to Morgan Stanley. If rumors of a cheaper and longer-lasting battery being revealed on Battery Day are true, Tesla can reap the benefits of supplying the rapidly growing EV sector, Jonas wrote.
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