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Elon Musk, co-founder and chief executive officer of Tesla 

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Morgan Stanley raised its “bull case” scenario for Tesla shares to $1,200 a share from $650 a share.

Tesla shares have more than tripled in the past six months. Morgan Stanley’s most optimistic scenario would mean that rally continues, with shares to climb another 50% from its current level near $800 a share

But Morgan Stanley’s overall view continues to be that Tesla’s stock will fall. The firm stuck by its underweight rating on Tesla and raised its base price target to $500 from $360 – a nearly 38% drop from the stock’s current price. Analyst Adam Jonas said in a note to investors that “we believe the shares offer an unfavorable risk-reward skew” compared to other auto stocks.

“Our new bull case reflects 4 million units of auto volume by 2030 with a 12% operating margin. This compares with our base case forecast of 2.2 million units and a 10% OP margin by 2030,” Jonas said.

Morgan Stanley has three different “cases” for where Tesla’s stock could go from here – bull, bear and base. It’s a confusing practice, given the “base case” is widely considered the firm’s real view, but one that’s been increasingly adopted by Wall Street analysts, especially for volatile stocks like Tesla. It gives analysts the chance to have it both ways, essentially: Make arguments for how Tesla’s stock could soar while staying pessimistic in case the rally unwinds and the stock plummets.

The bottom line of Jonas’ price target, he said, is that “investors should expect a very challenging” first quarter for Tesla. He forecast Tesla will deliver 89,000 vehicles in the first quarter, below Wall Street’s consensus view of 99,000, and will report a quarterly loss of about $440 million.

“We expect 1Q2020 to be notably weak as Tesla works through the China production and Model Y ramp and deals with potentially weaker demand in certain European markets as well as potential disruption from the coronavirus,” Jonas said.

Shares of Tesla rose 6% in trading.

– CNBC’s Michael Bloom contributed to this report.



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