Tesla (TSLA) has experienced significant volatility recently, dropping 14% from its $479.86 peak on Dec. 17, yet the stock managed to rebound on Monday following a bullish outlook from Morgan Stanley (MS) analyst Adam Jonas. Jonas, a noted Tesla proponent, has upped his price target for the company to $430 from $400, suggesting a 4.27% potential increase from the current $412.58 market price, while maintaining an ‘overweight’ rating and keeping Tesla as a “top pick.”
Jonas’s optimism is based on Tesla’s expanding role in what he terms “physical AI,” encompassing the company’s strengths in data collection, robotics, energy storage, AI computing, and manufacturing. He argues that 2025 could be pivotal for Tesla, as the market begins to fully appreciate these capabilities despite the known challenges in the electric vehicle (EV) market for that year.
Central to Jonas’s valuation is Tesla’s “network services,” which he sees as a significant growth driver. This segment includes autonomous driving features, charging infrastructure, vehicle maintenance, software updates, and media content. Jonas attributes $168 per share of his $430 price target to this aspect, indicating it constitutes 39% of Tesla’s total valuation in his model. Interestingly, he values Tesla’s robotaxi service slightly higher than its core automobile business, at $90 per share versus $89 for the latter.
In a more optimistic scenario, Jonas significantly increased his bull case target for Tesla to $800 per share from $600. Here, he envisions Tesla selling 7 million vehicles by 2030 with a 26% gross margin. In this scenario, the autonomous ridesharing service is projected to contribute $263 per share, or 33% of the total $800 valuation, highlighting the future potential of Tesla’s mobility services over traditional car sales, which are pegged at $130 per share.
Jonas emphasizes that while the automotive segment remains crucial, it’s the integration of AI into physical products — what he calls “embodied AI” — that he believes will be the primary driver for Tesla’s stock price appreciation. This perspective not only reflects confidence in Tesla’s current business model but also in its strategic direction towards becoming a leader in autonomous mobility and related services.
The analysis by Jonas at Morgan Stanley underscores a broader narrative in the investment community about Tesla’s potential beyond being just an automaker. It positions Tesla within the AI and tech ecosystem, where the company’s data advantage and infrastructure could lead to significant value creation through network services and autonomous technologies. This could set Tesla apart in an increasingly competitive EV landscape, where traditional metrics like vehicle sales and margins are complemented by innovative revenue streams from technology and services.
Price Action: Tesla shares experienced a positive trading session on Monday, closing at $403.31, up $8.57 or 2.17%. The stock continued to climb after hours, gaining an additional $9.44 or 2.34% to reach $412.58. With a market capitalization of $1.27 trillion, Tesla remains the world’s 8th most valuable company. The stock has demonstrated strong performance over the past year, achieving an 84.25% year-over-year gain.
The 52-week trading range for Tesla shares has been between $138.80 and $488.54. Additionally, as of January 10, 2025, Tesla’s price-to-earnings (PE) ratio stands at 193.51. This ratio indicates that investors are willing to pay a premium for Tesla shares, likely due to expectations of continued growth and innovation in the electric vehicle and clean energy markets.
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