Electric vehicle maker Tesla is investment bank Morgan Stanley’s new “top pick” in the U.S. automotive industry. The position was previously held by Ford.
According to Morgan Stanley’s analysts, Tesla has a huge upside thanks to its energy business, which is projected to become more valuable than the company’s EV business in the future. Additionally, Tesla is expected to continue raking in zero-emission vehicle (ZEV) credit revenue as legacy automakers like Ford scale down their EV expansion plans.
Tesla also received points for successfully conducting cost-cutting and restructuring operations.
“We estimate Tesla may account for as much as half the credit sales in the market, supporting a 100% margin business for Tesla that may not be anticipated by the investment community at this time,” Morgan Stanley analysts said in a note shared with clients.
Tesla’s stock plunged by 13% last week after the EV maker shared weaker-than-expected second-quarter earnings. The company reported $0.52 in adjusted earnings per share compared to $0.62 expected by analysts, although it’s $25.50 billion in revenue topped the estimates of $24.77 billion.
However, Tesla shares are on their way to bounce back this week. The stock jumped by 5.60% after Morgan Stanley’s note and closed at $232.10 per share.