According to Morgan Stanley analyst Adam Jonas, one of the top-ranked Wall Street analysts, Tesla’s (TSLA) revenue should grow larger than GM and Ford combined within the next 5 years.
Tesla’s stock performance has been incredible for a long time – it has long been more valuable than companies like GM, and it became the most valuable automaker almost two years ago.
However, the argument has been that it is not selling nearly as many vehicles as those other automakers and not bringing as much revenue. This is starting to change fast, and Morgan Stanley predicts that Tesla’s revenue will become industry-leading within the next five years.
Adam Jonas, Morgan Stanley analyst covering Tesla, wrote in a new note to clients this week:
Most auto investors we speak still struggle with the idea that Tesla could ever be bigger than either GM or Ford. We expect Tesla revenues to be larger than GM + Ford (combined by 2027). The zero-sum game is hard to see today… should become obvious over the next 24 months.
Jonas is right that many people still can’t believe that it’s next to impossible, but those are often the same investors who thought Tesla would always only be a niche automaker, which is now producing electric vehicles at an annual rate of over one million units.
The analyst believes that Tesla’s revenue lead will also come from a much higher than average transaction price:
We estimate the typical Tesla sold commands an average transaction price (ATP) of approximately $60k or roughly 20% above the US average ATP, implying an adjusted ‘wallet share’ of 4.6%.
Here’s how the firm predicts Tesla’s shares of revenue growth in the next few years compared to GM’s:
Morgan Stanley has a $1,300 share price target on Tesla’s stock. Adam Jonas is ranked No. 645 out of 7,779 analysts on TipRanks, with a success rate of 53%, and an average return of 11.8%.
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