Tesla's FSD Breakthroughs and Morgan Stanley's Price Target Hike: A Recipe for After-Hours Stock Surge

Tesla (TSLA) shares rose over 2% in after-hours trading on Monday, driven by a combination of Morgan Stanley's price target hike and significant advancements in its Full Self-Driving (FSD) technology. Prominent Tesla bull Gary Black highlighted the key drivers behind the stock's surge, providing valuable insights into the company's recent progress and market sentiment.

Morgan Stanley analyst Adam Jonas raised the price target for Tesla to $430 from $400, while renewing the firm's 'overweight' recommendation on the stock. The analyst noted that Wall Street is increasingly recognizing the crucial role that AI-related functionalities play in the highly competitive electric vehicle (EV) market. Tesla's unique combination of expertise in data, robotics, energy storage, AI, manufacturing, and infrastructure, along with potential synergies with Elon Musk's other companies like SpaceX or xAI, has positioned the company as a leader in the emerging autonomous mobility market.

The analysts at Morgan Stanley emphasized the role of Tesla Mobility, the company's autonomous rideshare division, which is valued at $90 per share in the 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. Additionally, the increasing significance of Tesla's Network Services, encompassing recurring revenue streams such as Full Self-Driving (FSD), supercharging, and software upgrades, is expected to contribute approximately one-third of Tesla's total EBITDA by 2030, rising to nearly 60% by 2040. The Network Services segment is now valued at $168 per share, reflecting its growing importance to Tesla's business model.



Tesla's FSD v13.2 demonstrated a 750% increase in efficacy to 724 miles per disengagement on highways compared to 89 miles in the previous version, according to a post shared by CEO Elon Musk. This significant improvement in FSD technology contributed to Tesla's after-hours stock surge. The company's advancements in autonomous vehicle technology and its integration of embodied AI have positioned it as a leader in the emerging autonomous mobility market, with a unique combination of expertise in data, robotics, energy storage, AI, manufacturing, and infrastructure.



Regulatory changes under the incoming administration may have minimal impact on Tesla's zero-emission vehicle credit sales, as analysts had already forecast these revenues to decline in coming years. However, any rollback of President Joe Biden-era emissions targets could potentially affect Tesla's valuation. Despite these headwinds, Tesla's stock has shown remarkable strength, currently trading around $387, up over 45% from its third-quarter lows. The company maintains strong support from Wall Street, with recent analyst coverage remaining largely positive.

In conclusion, Tesla's after-hours stock surge was driven by a combination of Morgan Stanley's price target hike and significant advancements in its Full Self-Driving technology. The company's unique combination of expertise in data, robotics, energy storage, AI, manufacturing, and infrastructure, along with potential synergies with Elon Musk's other companies, has positioned it as a leader in the emerging autonomous mobility market. Despite potential regulatory challenges, Tesla's stock has shown remarkable strength, with strong support from Wall Street analysts. As the company continues to innovate and expand its offerings, investors can expect to see further growth and potential upside in the coming years.