1 Wall Street Analyst Just Called Tesla a Top Pick. Is it a Buy Now?

Tesla (NASDAQ: TSLA) stock has emerged as a big winner in 2024. First, the stock soared after its Q3 earnings report release on Oct. 2, posting stronger profit growth than expected, as well as solid revenue growth. Then, Tesla stock soared following the election of Donald Trump as U.S. president. CEO Elon Musk closely aligned himself with Trump, spending hundreds of millions to help get him elected. Investors now expect Tesla will get favorable treatment in return. Reports have also emerged that Tesla will launch its budget-priced Model Q next year, which will be its first electric vehicle (EV) priced under $30,000.

The momentum earned Tesla a price-target hike from a longtime bull on the stock.

Analyst calls Tesla a "top pick"

Morgan Stanley's Adam Jonas, a closely followed Tesla analyst, just hiked his price target on the EV stock from $310 to $400 and called it his "top pick" in the auto sector. While Jonas acknowledged that policy changes, like the removal of EV tax credits, could pose a near-term headwind for the company, the company's emphasis on developing an autonomous vehicle is likely to separate Tesla from its competitors.

Is Tesla a buy?

Tesla's stock price has nearly doubled since before the Q3 earnings report, but its valuation is now the most expensive it's been in a long time, trading at a price-to-earnings ratio of 110. The business has also slowed substantially from its previous growth rate and is on track for single-digit revenue growth this year. Musk forecasts at least 20% production growth in 2025, but whether or not Tesla will be successful in its autonomous vehicle efforts will likely be the pivot point for the stock.

Given that the proposed autonomous Cybercab isn't expected to go into production until 2026, investors may need to be patient with Tesla stock in 2025 as a lot of the good news for Tesla is already priced into the stock.

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*Stock Advisor returns as of December 9, 2024

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.