Morgan Stanley delivers blunt message on Tesla stock before earnings

Tesla (TSLA) is heading into another pivotal earnings test on January 28, and Morgan Stanley is striking a carefully balanced tone. 

The bank reiterated an Equal-weight (Neutral) rating on Tesla stock while keeping its $425 price target unchanged, signaling that, despite recent meaningful developments, it’s not enough to prompt a near-term rethink of the stock. 

I feel that distinction is pretty apt, considering a familiar earnings setup.

On the surface, the fundamentals will likely be another downer for the EV giant.  

Q4 EV deliveries continued a disappointing pattern, with a double-digit decline compared with the same period last year, leaving Tesla trailing BYD in overall sales again.

However, the narrative is clearly shifted towards autonomy, and Morgan Stanley is acknowledging progress on that end. 

Tesla isn’t trading like a traditional automaker, which is why the firm sees growing third-party validation of its autonomy efforts as strategically important.

Hence, despite the near-term bearishness, I view the Q4 earnings report as a critical gauge of whether Tesla’s autonomy story is gaining external credibility and economic traction.

Tesla’s Q4 delivery drop raises the stakes

• Q4 deliveries missed analyst expectations (again): Tesla delivered 418,227 vehicles in Q4 2025, 15.6% lower compared to the prior-year period.
• Consensus gap: Tesla’s internal Q4 consensus was 422,850 deliveries, so the print came in 4,600 units lighter (roughly 1.1%).
• Full-year slide is even bigger: Tesla delivered 1,636,129 vehicles in 2025, down nearly 9% from 2024 (the second consecutive year of annual delivery declines).

BYD’s delivery pace keeps widening the gap

• Scale advantage: BYD (BYDDY) reported roughly 4.60 million total “new energy vehicle” (NEV) sales in 2025, rising 7.7% year-over-year.
• Q4 EV momentum: BYD posted 650,811 passenger BEV sales in Q4, rising a superb 9.3% year-over-year (and 11.7% sequentially).
• Europe snapshot highlights the major shift: In December registration data, Tesla’s EU registrations dropped by a worrying 20% while BYD’s jumped nearly 230%.

Morgan Stanley sees insurance as a quiet validator for Tesla’s FSD

Last week, U.S. insurer Lemonade turned heads by rolling out an “Autonomous Car” insurance product for Tesla FSD users.

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The groundbreaking new offering gives users a 50% discount on premiums for every mile driven with Tesla’s FSD (Supervised) engaged, a move that has caught Wall Street’s attention.

Morgan Stanley analyst Andrew Percoco believes Lemonade’s new offering has major implications for Tesla’s long-term autonomy story.

He argues that Lemonade’s approach points to growing confidence in the quality of Tesla’s driving data, with a greater focus on real-world outcomes. 

Moreover, by effectively lowering premiums, the policy will likely lead to wider FSD adoption, thereby strengthening Tesla’s overall value proposition.

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Over time, the analyst points to a positive feedback loop in which miles driven lead to better performance and safety. 

A quick scan of Reddit shows cautious enthusiasm, with the majority cheering the discount as a meaningful start rather than a final destination.

Upcoming quarter’s earnings snapshot (compared with FQ4 2024)

• Report date:Jan. 28, 2026 (post-market): Wall Street is forecasting $24.75 billion in revenue, down about 3.7% from $25.71 billion in FQ4 2024 (Dec. 2024).
• EPS expectations:Normalized EPS estimated $0.45 vs. $0.73 in FQ4 2024 (down about 38% year-over-year). GAAP EPS estimated at $0.35 vs. $0.04 in FQ4 2024 (a positive 31-cent swing).
• Revisions trend (last 90 days):11 upward EPS revisions vs. 6 downward, a relatively modest tilt higher going into the print.
  Source: Seeking Alpha

Tesla keeps betting on autonomy despite delivery slump

Clearly, FSD is at the top of Tesla’s agenda, and beyond Musk’s lofty claims propping it up, the numbers behind it are getting harder to ignore.

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As of late 2025, according to Tisery, Tesla sped past 7 billion miles in FSD in supervised mode. 

Every mile effectively feeds Tesla’s massive neural networks with real-world driving data, and with more than 6 million vehicles on the road, the pace at which the EV giant collects that data is impressive, to say the least.

Safety data is another critical piece of the puzzle. 

In fact, Tesla reports that its cars that actively use driver assistance features experience one crash for every 6.36 million miles, compared to one for every 993,000 miles when those features are switched off.

Putting things in perspective, U.S. government data shows an average of approximately 1 crash every 702,000 miles nationwide. Though Tesla still has a long way to go before achieving full autonomy, these numbers point to steady improvement.

Multiple FSD users online have been lauding the feature. 

In a post on the r/TeslaFSD subreddit, counting roughly 105,000 members, users shared some glowing feedback in a recent post.

One user, Alarming_Squash_3731, wrote:

In a follow-up, another user, Wes-man, wrote:

Tesla targets show a brutal split ahead of earnings

Tesla stock is currently trading at $435.20, and Wall Street’s target spread is all over the place heading into another stern earnings test. 

According to MarketBeat, the Wall Street consensusaverage price target is $411.40, representing a (-5.47% downside).

• Barclays: $360 (-17.28% downside).
• Goldman Sachs: $420 (3.49% downside).
• Piper Sandler: $500 (+14.89% upside).
• Wedbush: $600 (+37.87% upside).

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