Morgan Stanley’s Highest Conviction Stocks: Top 20 Stocks To Buy

3. Tesla, Inc. (NASDAQ:TSLA)

Share Price Upside: 43%

Number of Hedge Fund Investors In Q2 2024: 85

Tesla, Inc. (NASDAQ:TSLA) is the biggest pure play electric vehicle manufacturer in the world. Along with making EVs, it also has a energy storage business and generates additional income by selling regulatory credits. Tesla, Inc. (NASDAQ:TSLA) has a wide moat because of its manufacturing model which has stood the test of time and allowed it to churn out a whopping 1.85 million EVs in 2023. At the same time, its energy storage business has surprised investors in 2024 with strong growth. During Q2, Tesla, Inc. (NASDAQ:TSLA)’s energy storage revenue doubled to sit at $3 billion. This came at a time when its EV sales struggled in a high interest rate environment. Yet, EVs are key to Tesla, Inc. (NASDAQ:TSLA)’s hypothesis, since they account for 84% of its revenue. This leaves the firm vulnerable to lithium supply as well as tough competition in fast growing markets such as China.

Tesla, Inc. (NASDAQ:TSLA)’s Elon Musk believes that there is huge potential in humanoid robots, though. Here’s what he said during the Q2 2024 earnings call:

“Yes, I mean, as I’ve said a few times, I think the long-term value of Optimus will exceed that of everything else that Tesla combined. So, it’s simply — just simply consider the usefulness utility of a humanoid robot that can do pretty much anything you ask of it. I think everyone on earth is going to want one. There’s 8 billion people on earth, so it’s 8 billion right there. Then you’ve got, all of the industrial uses, which is probably at least as much, if not way more. So I suspect that the long-term demand for general purpose humanoid robots is in excess of 20 billion units. And Tesla is — that has the most advanced humanoid robot in the world, and is also very good at manufacturing, which these other companies are not.

And we’ve got a lot of experience — with the most experienced with the world leaders in real world AI. So we have all of the ingredients. I think we are unique in having all of the ingredients necessary for large scale, high utility, generalized humanoid robots. That’s why my rough estimate long-term is in accordance with the ARK [ph] Invest analysis of market cap on the order of $5 trillion for — maybe more for autonomous transport, and it’s several times that number for general purpose humanoid robots. I mean, at that point, I’m not sure what money even means, but in the benign AI scenario, we are headed for an age of abundance where there is no shortage of goods and services. Anyone can have pretty much anything they want. It’s a wild — very wild future we’re heading for.”