Investors have more confidence in Tesla emerging from the coronavirus pandemic better positioned to lead in emerging technologies such as all-electric and autonomous than they do in traditional automakers such as General Motors and Toyota Motor.
That's according to a new two-question survey of 25 investors released Wednesday by Morgan Stanley. A majority, or 56%, of the investors also believe it's "extremely unlikely" or "somewhat unlikely" that the traditional auto industry can "earn its cost of capital" in the manufacturing of such vehicles, according to the survey.
The confidence in Tesla is based on Morgan Stanley asking investors which of the three companies they would give $10 billion to for five years to invest in developing and manufacturing all-electric and autonomous vehicles. Only 20% of respondents chose GM; 24% picked Toyota; and 56% selected Tesla.
Despite the confidence shown by the investors in the Morgan Stanley survey, Bank of America on Wednesday downgraded Tesla to underperform from neutral, after the recent rally in the automaker's shares drove their valuation too high in the eyes of the firm.
The survey results aren't necessarily surprising given Wall Street's support for Tesla before Covid-19, but they reemphasize the growing divide between Tesla and traditional automakers attempting to break into Tesla's stranglehold on all-electric vehicles.
Shares of Tesla this year are up 67% to more than $700 as of Wednesday. That compares with GM sliding 42% this year to $21.39, and Toyota down 14% to less than $122. Ford Motor, which was not included in the survey, is down about 49% this year to less than $5.
Morgan Stanley expects Tesla to burn up to $1 billion or more of free cash flow this year but still expects volume growth of about 5% to 10% or more. That compares to the average automaker under its coverage, which is forecast to be down 20% to 25% and free cash burn anywhere between 10% and 30% of their market cap.
-- CNBC's Yun Li contributed to this article.Â