Morgan Stanley's Tesla analyst explains the stocks he would rather own

People visit a Tesla showroom in Beijing, China on July 9, 2014.
Wang Zhao | AFP | Getty Images

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Morgan Stanley auto analyst Adam Jonas told CNBC on Tuesday that he believes there is a path for Tesla to add significant value beyond the stock's current levels around $1,500. 

But Jonas, who has an underweight rating on the stock and a price target of $740, said he views Tesla being in an "arms race" for the future of autos. For that reason, he said he sees other stocks that offer attractive investment opportunities. 

 "We'd rather own the arms dealers than picking the winning campaign right now when there's so much more discovery left in front of us," Jonas said on "Squawk Alley."