Morgan Stanley raises Tesla's (TSLA.US) target price to USD 430, with a potential high of USD 800, citing improved valuation of travel and network services.

Morgan Stanley reiterates Tesla (TSLA.US) as its top pick and raises its price target to $430 from $400. The bank says the adjustment is driven by higher valuations for mobility services and network services, partially offset by lower valuations for third-party battery businesses. In its revised sum-of-the-parts model, the bank values the mobility services segment of Tesla at $90 per share; it expects the fleet size of the mobility services segment to grow to 7.5mn vehicles by 2040, with revenue per mile of $1.46 and an EBITDA margin of 29%. Morgan Stanley also highlights the growing importance of Tesla's network services segment, which covers full self-driving (FSD), supercharging, and software upgrades, among other recurring revenue streams. The bank values the network services segment at $168 per share, reflecting its growing importance in Tesla's business model; it expects the network services segment to contribute about a third of Tesla's total EBITDA by 2030 and nearly 60% by 2040. At the same time, Morgan Stanley has a bull case target of $800 for Tesla, with a fleet size of 12mn vehicles by 2040 and revenue per mile of $1.50 and an EBITDA margin of 45%. However, the bank has a bear case target of $200 for Tesla, reflecting potential headwinds such as stricter regulations and slower market expansion. Morgan Stanley notes that Tesla's advantages in data collection, robotics, energy storage, artificial intelligence/computation, manufacturing, and supporting infrastructure put it in a leading position in the emerging autonomous driving transportation market. The bank says the recent rise in Tesla's share price undervalues the growing "surface area" between Tesla and embodied artificial intelligence, including the aforementioned advantages and the benefits of the company's collaboration with Musk's other companies (SpaceX, xAI, etc). Morgan Stanley believes that Tesla still has room to grow in 2025, when the market's appreciation of Tesla's unique combination of expertise will be further reflected in the company's share price, offsetting the known challenges in the electric vehicle market. The bank adds that the latest developments in artificial intelligence and autonomous driving technology, along with Musk's influence in the Trump administration, will help accelerate investors' focus on Tesla. The bank says the scale and complexity of data, along with stringent automotive safety requirements (and Musk's ability to set such standards in the autonomous driving space), make the global transportation market and Tesla a unique proxy for the investment theme of artificial intelligence.