Morgan Stanley analysts believe that the recent public spat between Elon Musk and President Donald Trump might have been a strategic move. The dispute began when Musk criticized Trump’s tax bill, resulting in a significant plunge in Tesla’s stock and a substantial market value loss.
What Happened
The feud between Musk and Trump started with Musk’s criticism of the tax bill, leading to a 14% drop in Tesla’s stock and a $150 billion market value loss in a single day. Trump responded by threatening to cancel federal contracts with Musk’s companies, including SpaceX. At one point, Musk considered decommissioning the Dragon spacecraft but later abandoned the idea.
A Calculated Strategy
Morgan Stanley stated that the feud was “likely part of a planned strategy by Elon to achieve a specific goal with his approach designed to bring maximum public attention to the issue.” Despite this, Morgan Stanley remains bullish on Tesla, raising its price target from $400 to $410 and reiterating it as their ‘top pick’ in the U.S. auto sector.
Tesla’s Leading Position
The analysts highlighted Tesla’s leading position in physical artificial intelligence (AI) and other sectors, stating that Tesla is uniquely positioned in these areas. They also noted that Musk’s political engagement is now closely linked to Tesla’s investment narrative, warning that investors expecting Musk to concentrate only on Tesla might be ignoring an ongoing trend. “The two are very much inseparable,” stated Morgan Stanley.
No Long-term Effects
Morgan Stanley does not foresee any long-term effects of the rift between Musk and Trump. While acknowledging the possible downsides of Musk’s public stance, the analysts remain confident that Tesla’s leadership recognizes and understands these risks.
Why It Matters
The feud and its subsequent fallout have been closely watched by investors and analysts alike. Despite the tension, Wedbush Securities’ managing director, Dan Ives, reiterated his bullish views on Tesla. Trump also expressed his intention to keep his Tesla Model S and Starlink satellite internet service, indicating a cooling of tensions.
Recent Developments
On June 11th, Musk expressed regret over his comments about Trump, stating they “went too far.” Despite the controversy, Musk deemed the $113 billion loss he incurred while working on DOGE “worth it.” These events highlight the complex relationship between politics and business, with potential impacts on investor sentiment and market dynamics. Morgan Stanley’s increased price target indicates continued confidence in Tesla’s future.