Tesla's (NASDAQ:TSLA) stock could surge as much as 50% from current prices, according to Morgan Stanley.
Analysts at the investment firm say that the electric-vehicle maker's new Cybertruck could be a bigger success than many investors currently expect. They posit that Tesla could sell as many as 100,000 of its new electric pickup trucks by 2024 at an average price of $50,000.
Morgan Stanley also sees the potential for Tesla's business in China to pick up steam. Model 3 cars that are built in China will receive generous state subsidies designed to fuel the growth of electric vehicles in that country, according to a recent report by Reuters.
"We raise our bull case to $500 to account for the newly unveiled Cybertruck and a more optimistic scenario in China," Morgan Stanley said.
Morgan Stanley cautions, however, that these estimates comprise its best-case scenario for Tesla. The firm's base case, or most-probable scenario, projects far lower sales and profit. In turn, Morgan Stanley maintained its "equal-weight" rating on the stock and $250 12-month price target.
"To be clear, we are not bullish on Tesla longer term, especially as, over time, we believe Tesla could be perceived by the market more and more like a traditional auto OEM [original equipment manufacturer]," Morgan Stanley analyst Adam Jonas said.
Jonas also said that despite the potential for significant growth in China, he remains "cautious" on Tesla's prospects there due to geopolitical concerns. Trade tensions are an obvious source of worry as talks between the U.S. and China have so far failed to result in an agreement.
The bears could have their day
Morgan Stanley also has a bear-case, or worst-case, valuation for Tesla. In this scenario, demand for the company's electric vehicles falls short of expectations, pressuring its cash flow production and limiting its ability to raise more capital. The stock could then plummet to $10 if this nightmare situation comes to pass.
With such a wide range of potential price targets, Morgan Stanley is essentially admitting that it finds Tesla extremely difficult to value. Moreover, it's a battleground stock. There are many ardent bulls who are betting on its shares to rise in value but also many bears betting against it.
In fact, approximately 20% of Tesla's shares are currently sold short, meaning some traders are hoping to profit from a decline in Tesla's stock price.
As a result, Tesla's share price is likely to remain volatile, as bulls and bears continue to battle it out and investors adjust their views based on new developments.