Morgan Stanley reaffirms Tesla (TSLA, Financial) as its top stock pick and has increased its price target from $400 to $430. The adjustment is driven by the rising valuation of Tesla's mobility and network services, partially offset by a decrease in the valuation of third-party battery business.
In its revised sum-of-the-parts (SOTP) model, Morgan Stanley values Tesla's mobility services at $90 per share. By 2040, the mobility service fleet is expected to grow to 7.5 million vehicles, with revenue per mile projected at $1.46 and an EBITDA margin of 29%.
Morgan Stanley also highlights the growing importance of Tesla's network services, which include full self-driving (FSD), supercharging, and software upgrades, as recurring revenue streams. The network services are currently valued at $168 per share and are projected to contribute about one-third of Tesla's total EBITDA by 2030, increasing to nearly 60% by 2040.
In a bullish scenario, Morgan Stanley sets a target price of $800, with fleet size reaching 12 million vehicles by 2040, revenue per mile at $1.50, and an EBITDA margin of 45%. The bearish scenario, with potential challenges like stricter regulations and slow market expansion, sets a target price at $200.
Morgan Stanley emphasizes Tesla's strengths in data collection, robotics, energy storage, AI/computation, and manufacturing, positioning it as a leader in the autonomous mobility market. They believe Tesla has room for growth into 2025, with AI and autonomous driving advancements amplifying investor interest.
