Tesla will rally another 30% as it asserts its manufacturing leadership, says Morgan Stanley's Jonas

Published Mon, Oct 25 20216:32 AM EDTUpdated Mon, Oct 25 20216:33 AM EDT

Shares of Tesla closed at an all-time high Friday after a stellar quarterly earnings report, but Morgan Stanley sees the stock going even higher from here. Morgan Stanley's notable auto analyst Adam Jonas hiked his price target on Tesla to $1,200 from $900. The new price forecast is about 31% higher than Tesla's closing price Friday. The firm also reiterated its overweight rating on the stock. "The next 12 months can demonstrate Tesla's manufacturing leadership, a step change in costs/complexity and higher growth in the vehicle user base," wrote Jonas. Tesla's stock rallied to a record last week after the company posted record profit and revenue for the third quarter Wednesday. The electric vehicle maker reported deliveries growth and profit margin improvement, particularly notable as the industry battles supply shortages. Shares are up 29% for 2021 and were higher by another 2% in premarket trading Monday following the Morgan Stanley call. "The combination of better than expected growth and margins under difficult industrial circumstances gives us an opportunity to narrow the gap in our forecasts to management's long term targets," said Jonas, noting his new target price was still using conservative volume forecasts in his view. The firm also noted as Tesla's user base grows with more vehicle sales, the company's network services segment will also benefit. "Greater sales, more installed base… more services revenue," Jonas said. "The compounding element to the growth of the car parc [Tesla's user base] cannot be overstated." But overall, Morgan Stanley's bullish long term outlook on Tesla is based on its believe that the company will be able to reduce the price of electric vehicles by leading the industry in a finding new wars to produce the cars. "We believe that the market is underestimating Tesla's ability to bring to market breakthrough innovations in vehicle design and manufacturing," Jonas said. "We believe Tesla is uniquely positioned to push the boundaries at the epicenter of a manufacturing change in auto making." —CNBC's Michael Bloom contributed reporting.