Morgan Stanley analyst Adam Jonas, one of the most influential analysts covering Tesla (TSLA), is out with a new note to clients today.

In the note, he is rethinking the rationale behind Tesla’s growing valuation by comparing it to Waymo, Alphabet’s self-driving car company, and aligning it to a potential successful launch of the Model 3. 

Jonas has long been amongst the analysts warning that Tesla will delay Model 3 deliveries and/or have an extremely slow production ramp up.

At first, he was predicting zero delivery in 2017 and only a few thousands in 2018, but he has updated his valuation model with a slightly more optimistic one last month.

Though with Tesla’s recent stock price surge, he doesn’t even believe Model 3 should be the main short-term focus anymore. He wrote in the note:

At this valuation, it’s not so much about the Model 3 anymore… In our discussions with investors, the overwhelming majority expect the Model 3 to launch on time and to achieve some level of commercial success right out of the gate. While we don’t want to underestimate the potential impact on sentiment if the Model 3 meets such expectations, we believe that for an investor to put fresh money into a name that consumes so much capital at a $60bn valuation, he or she must reasonably consider what fundamental drivers could drive a potential doubling or even a tripling of the market value over the medium term.”

The only things he expects could send the stock higher is a clearer path to profitability, which ironically is linked to the Model 3 in the short term, and Tesla building its lead in the “shared mobility arena” with ‘Tesla Network“.

When it comes to profit, Jonas says that the short thesis, which has become popular with Tesla lately, is based on Tesla’s “continuing dependency on the stock market to fund ever more ambitious spending plans”, but he expects that it could change with a successful ramp up of Model 3 production.

As for the “shared mobility arena”, Jonas puts Tesla’s $60 billion market cap into perspective by comparing to the Waymo’s estimated potential $70 billion market cap:

“The recent run in the mega-cap tech firms has moved investors to ask: “What markets are large enough and ripe enough for disruption to move the needle for a firm worth the better part of $1tn?” Our discussions with investors suggest that the global auto and transportation industry sits at the top of the list. If you consider markets where applied AI has the potential to open up vast new markets for adjacent data monetization, autos sits at the epicenter of the tech disruption spectrum. Our work with Morgan Stanley’s Internet team (led by Brian Nowak) has found that the value of Alphabet’s self-driving car unit Waymo could be as high as $70bn for just 1% of the global miles market by 2030.”

Of course, it depends on the market shares of the new shared mobility sector that each company can capture, but Morgan Stanley puts Tesla in the same “exclusive collection of firms” that could capitalize on the disruption.

Finally, he maintains his price target at $305, which represents a significant downside from the current share price of $361, but he changed his worst case scenario from $50 to $175.

His bull case remains unchanged at $511 per share.

Jonas is one of the top-ranked analysts on Tip Rank: #446 out of 4561. He has one of the most extensive histories of coverage on Tesla: