Tesla’s stock (TSLA) has received a nice boost today from one of its biggest cheerleaders on Wall Street, and it’s based on the company achieving a “beyond an automaker” scenario.
For years, Tesla investors have pushed the argument that Tesla is more than an auto company. That’s technically true. The company is also a major player in the energy space and is making advancements in AI and other spaces.
However, so far, the financials are almost completely driven by its auto business. Therefore, the idea hasn’t been super popular on Wall Street.
Adam Jonas, who covers Tesla for Morgan Stanley, has been among the noted Wall Street analysts most open to start accounting for other Tesla businesses in the valuation. In a new note to clients today, the analyst brought the idea back into focus:
Many investors still debate the merits of Tesla as ‘more than an auto company.’ In our opinion, Tesla is definitely an auto company. It is also an AI company. Think ‘and’ not ‘or.’
To illustrate his point, Jonas explained that only 33% of his $380 price target for Tesla is linked to the automotive business:
In our opinion, Tesla is far more than an auto company. Of our $380 price target, our valuation of the ‘core’ auto business is $86/share, leaving 77% of our target derived by Network Services, Mobility, 3rd-party battery/FSD licensing, Energy and Insurance. We receive significant pushback from our clients for including non-auto revenue streams in our valuation. Our OW thesis is highly dependent upon these business lines becoming far greater drivers of earnings with clear milestones/proof-points backed by accompanying financial disclosures.
Morgan Stanley also notes that the $380 price target is only that average case, and the firm also has a $550 bull case and a $120 bear case.
Electrek’s Take
I understand Morgan Stanley getting pushback on that, considering how Tesla’s current share price is overwhelmingly driven by its auto business.
But I think its energy business is going to be massive.
Top comment by HH702
I remember when it was going to be the solar roof that was going to be the next big thing, and now that is just made by a Chinese company.
Then it was the boring company that would have tunnels everywhere with self driving Tesla's replacing subways.
Then it was going to be the 4680 and Tesla would be selling batteries to everyone else, now that is 2 years behind CATL in technology and barely able to support Tesla's lowest selling products. Then it was Dojo because noone else would have an exascale AI computer, now anyone can rent one from multiple cloud providers before Tesla has even run anything on Dojo.
Then it was FSD would be used by everyone int he industry. Except it is Mobileye that is busy signing up everyone for their FSD competitor at a fraction of the price Tesla hoped to charge . And with a real path to L4.
Now it is Optimus (or should that be Optimist)
Tesla bulls always have to cling to something to justify the ridiculous value ascribed to a car company that is busy having it margins smashed down by competitive pressure and that has 2 new factories barely producing at 50% of design capacity despite being open for 2 years.
Not because of solar deployment or even energy storage deployment, which is going to be huge too, but because of its energy software like virtual power plants and Tesla Electric.
I think those are going to become huge businesses as Tesla onboards more people through deployments of Powerwalls, gateways, and solar inverters, which can control the loads.
However, I think the rest, like AI, insurance, etc., is up for debate.
What do you think? Let us know in the comment section below.
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