Tesla gains after Morgan Stanley called it the top pick in the auto sector

Tesla (NASDAQ:TSLA) motored higher in early trading on Monday after Morgan Stanley named the electric vehicle and autonomy company its top pick in the automobile sector.

Analyst Adam Jonas and his team pointed to 40% upside to the firm’s price target of $310 target on Overweight-rated Tesla (TSLA), more managed expectations on the auto side of the business, and powerful emerging drivers of firm value. Jonas highlighted that Tesla (TSLA) may be cornering the market on ZEV credits and has seen increased contribution from recurring services revenue. The strong position of Tesla (TSLA) in the fast-growing energy storage business is also part of the bullish thesis.

“While Tesla is still making cars, we note the company is aggressively redeploying incremental resources, technology, people and capital away from the auto side of the house,” noted Jonas. He also pointed out that it is notable that Ford (F) management spent far more time on its Q2 conference call discussing electric vehicles than Tesla (TSLA) did.

“It is increasingly clear to us that the commercial opportunity of non-auto expressions of embodied AI is likely far larger and faster-adopting than that of autonomous cars. We believe the humanoids opportunity is far bigger and faster adopting than autonomous cars and will see a greater quantum of capital behind it.”

Shares of Tesla (TSLA) were up 1.72% to $223.48 during the premarket session on Monday. The 52-week high is $278.98. Short interest on TSLA stands at 3.8% of the total float.