Tesla (TSLA) bounced back on Tuesday following its worst day in five years after one of Wall Street’s biggest bulls said it was time to buy the stock.

“Tesla shares have fallen 50% from the Dec 17th highs (and down 45% YTD) on poor sales data, negative brand sentiment, and market de-grossing. We see the pullback as a buying opportunity for an embodied AI compounder,” Morgan Stanley analyst Adam Jonas said in a note to clients late Monday night.

Tesla stock jumped 4% in early trade but pared gains following the latest tariff threat from President Trump vowing to add an additional "25% tariff, to 50%, on all steel and aluminum coming into the United States from Canada."

Jonas believes sentiment and the Tesla “narrative” tend to follow share price moves, which seems obvious, but Jonas's point is that when the stock is moving up, the story is about Tesla’s AI initiatives and autonomous technology; when the stock is down, it’s about lost sales, brand degradation, and Musk’s distractions.

The next year will be a volatile one, Jonas predicts, with Morgan Stanley’s bear case ($200) and bull case ($800) tested this year.

Jonas believes upside catalysts like the “unveil” of robotaxi testing this year in Austin, new federal rules on autonomous vehicle regulation, an update on Optimus robots, and auto-related technological “milestones” will come this year.

Jonas and Morgan Stanley have a “Top Pick” rating on Tesla stock, with a $430 price target.

In addition, other big headlines are driving the Tesla “narrative” on Tuesday.

ASSOCIATED PRESS

Late Monday night, President Trump waded into the Tesla discussion, with Trump claiming leftist agitators were behind protests at Tesla showrooms and were “illegally and collusively” trying to boycott the company. Trump said he would buy a Tesla Tuesday in support of the company and embattled CEO Elon Musk, though that purchase is not confirmed.

Musk, as head of the White House’s controversial DOGE initiative, has seen his standing slide among Americans, while protests have gained steam at Tesla showrooms in the US. In addition to sliding sales in Europe and China, the company is experiencing negative sentiment from current US Tesla owners, some of whom are selling their EVs.

Musk admitted that running the DOGE initiative may be affecting his leadership of his companies like Tesla, SpaceX, and xAI, among others.

In an interview with Fox Business, Musk said he was running his business “with great difficulty,” having to balance the needs of his government role with oversight of his empire.

“It is tough sledding,” Musk added, “but I think we’re doing the right thing.”

Tesla shares are down more than 50% since hitting an all-time closing high of $479.86 on Dec. 17, 2024.

Pras Subramanian is a reporter for Yahoo Finance. You can follow him on X and on Instagram.

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