Tesla: Balancing Near-Term Fundamental Headwinds with Long-Term Autonomy and AI Optionality – Justifying a Hold Rating

Analyst Andrew Percoco of Morgan Stanley maintained a Hold rating on Tesla, retaining the price target of $425.00.

Andrew Percoco has given his Hold rating due to a combination of factors related to both Tesla’s near‑term fundamentals and its long‑term innovation pipeline. His team forecasts 2026 vehicle deliveries meaningfully below market expectations, with declines or only modest growth in key regions, which tempers the growth narrative for the core auto business. They also project thinner automotive gross margins than consensus and expect energy segment margins to soften slightly, limiting earnings leverage even as storage volumes expand. Additionally, Percoco models substantial free cash flow usage in 2026 driven by a sharp increase in capital expenditures, in contrast to the positive free cash flow anticipated by the broader market, suggesting near‑term financial pressure.
At the same time, Percoco acknowledges significant upside optionality tied to Tesla’s advanced initiatives, but views them as not yet fully de‑risked. His assumptions include a rising global adoption rate for FSD, contingent on regulatory progress in Europe and China and a successful rollout of Unsupervised FSD, which still requires execution and approval milestones. The early stages of the robotaxi and Cybercab platforms, including the limited initial fleet and the importance of demonstrating safety in markets like Austin, introduce further uncertainty around timing and profitability. Balancing these execution and regulatory risks against the sizable long‑term opportunity in autonomy, AI, and robotics, Percoco ultimately judges that the risk‑reward profile is appropriately reflected in the current share price, supporting a Hold stance rather than a more decisive buy or sell recommendation.

In another report released on January 13, Barclays also maintained a Hold rating on the stock with a $350.00 price target.

Based on the recent corporate insider activity of 42 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of TSLA in relation to earlier this year.