Tesla's Stock Surge: Morgan Stanley Upgrades Price Target to $430

Tesla (TSLA) shares have been on a roll, and Morgan Stanley has just upped the ante by upgrading the electric vehicle (EV) giant's price target to $430. The investment bank's analysts, led by Adam Jonas, cited several key factors driving this bullish move. Let's dive into the reasons behind this price target upgrade and explore what it means for Tesla's future.



1. Advancements in Autonomous Vehicle (AV) Technology: Tesla's leadership in autonomous mobility, backed by its expertise in data collection, robotics, energy storage, and AI/compute infrastructure, has not gone unnoticed. Morgan Stanley projects Tesla's autonomous fleet to reach 7.5 million vehicles by 2040, with revenue of $1.46 per mile and a 29% EBITDA margin. This growth potential is a significant driver of the price target upgrade.
2. Embodied AI Applications: The analysts also highlighted Tesla's broader potential in embodied AI, with applications in aviation and marine sectors yet to be fully reflected in current valuations. They envision a fleet size of 12 million vehicles by 2040, generating $1.50 per mile in revenue and achieving a 45% EBITDA margin. This expansion into new sectors further boosts Tesla's valuation.
3. Network Services Growth: Tesla's Network Services, including recurring revenue streams like Full Self-Driving (FSD), supercharging, and software upgrades, are expected to contribute one-third of Tesla's EBITDA by 2030, rising to nearly 60% by 2040. This segment is now valued at $168 per share, reflecting its growing importance to Tesla's business model.
4. Tesla Mobility Expansion: The firm valued Tesla's autonomous rideshare division, Tesla Mobility, at $90 per share in its revised sum-of-the-parts (SOTP) model. The mobility fleet is projected to grow to 7.5 million vehicles by 2040, with an estimated revenue of $1.46 per mile and a 29% EBITDA margin.



Morgan Stanley's bull case valuation of $800 per share assumes a fleet size of 12 million vehicles by 2040, generating $1.50 per mile in revenue with a 45% EBITDA margin. This scenario envisions robust international expansion and greater pricing power, further emphasizing the potential of autonomous driving technology and robotaxi opportunities in Tesla's valuation.

In conclusion, Tesla's stock price surge, driven by advancements in autonomous vehicle technology, embodied AI applications, and the growth of Network Services, has led Morgan Stanley to upgrade the company's price target to $430. As Tesla continues to innovate and expand its offerings, investors can expect the EV giant to maintain its competitive edge in the market.