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EV leader Tesla (TSLA, Financial) shares rose 2 percent on Monday after Morgan Stanley increased its price target on the stock to $430 from $400, writing that the company's progress toward autonomous vehicle (AV) technology and embodied AI is 'quite encouraging.' The firm also estimated that the share was worth $800.
According to Morgan Stanley's updated analysis, Tesla's dominance in the emerging autonomous mobility market comes from strengths in data collection, robotics, energy storage and AI infrastructure. It also noted the power of Tesla Mobility, the company's autonomous rideshare division, worth $90 per share in a revised sum of the parts (SOTP) analysis. It projects the division will have a fleet of 7.5 million vehicles there by 2040 and produce $1.46 per mile in revenue with a 29% EBITDA margin.
As the report underscored the rising significance of Tesla's Network Services recurring revenue, including supercharging and full Self Driving subscriptions, all paid for as a monthly service it also warned that its leadership may face an uphill battle to demonstrate the 'core configuration' of the business going forward. An area, equating to $168 per share, is expected to account for one-third of Tesla's EBITDA by 2030 and more than 60 percent of EBITDA by 2040.
The new price target comes after Morgan Stanley's analyst Adam Jonas said the increase in the valuations placed on Tesla's Mobility and Network Services businesses has been partially offset by a lower estimated valuation for its third-party battery business.
Additionally, the report hinted at Tesla's unrealized potential in airborne AI the kind found in sectors such as aviation and marine that has not contributed to the company's valuation.
This article first appeared on GuruFocus.