Investing.com -- Morgan Stanley (NYSE:MS) has revised its price target for Tesla (NASDAQ:TSLA) shares, increasing it to $430 from $400, with a new bull case valuation of $800. Tesla’s advancements in autonomous vehicle (AV) technology and its integration of embodied AI are highlighted as key drivers for the updated valuation.
According to the report, Tesla’s unique combination of expertise in data collection, robotics, energy storage, and AI/compute infrastructure has positioned it as a leader in the emerging autonomous mobility market.
The analysts emphasized the role of Tesla Mobility, the company’s autonomous rideshare division, which is valued at $90 per share in the revised sum-of-the-parts (SOTP) model. The mobility fleet is projected to grow to 7.5 million vehicles by 2040, with an estimated revenue of $1.46 per mile and a 29% EBITDA margin.
Morgan Stanley also highlighted the increasing significance of Tesla's Network Services, encompassing recurring revenue streams such as Full Self-Driving (FSD), supercharging, and software upgrades.
This segment is expected to contribute approximately one-third of Tesla’s total EBITDA by 2030, rising to nearly 60% by 2040. The Network Services segment is now valued at $168 per share, reflecting its growing importance to Tesla’s business model.
“We raise our price target to $430 from $400 previously, driven by increases in our Mobility and Network Services valuations and partially offset by a decrease in our 3rd Party Battery business valuation,” analysts led by Adam Jonas wrote.
They note that Tesla’s broader potential in the embodied AI domain, including possibilities in aviation, marine, and other sectors is not yet factored in the valuation.
The analysts anticipate Tesla's unsupervised autonomous vehicle fleet to debut in a city setting by 2026. However, they do not project widespread deployment of autonomous vehicles in their Tesla Mobility forecasts until after 2030.
While self-driving policies might undergo reassessment at a national level under the incoming administration, Tesla still faces "significant hurdles" in overcoming challenges related to technology, testing, and permitting for near-term commercialization, analysts added.
The updated bull case of $800 per share assumes a fleet size of 12 million vehicles by 2040, generating $1.50 per mile in revenue with a 45% EBITDA margin. This scenario envisions robust international expansion and greater pricing power.
On the other hand, Morgan Stanley’s bear case valuation of $200 per share reflects potential headwinds such as tighter regulations and slower geographic adoption.