Will TSLA Surge to $300?

On September 11th, $Tesla Motors(TSLA)$ experienced a significant surge of 6% in its stock price following an optimistic assessment from Morgan Stanley. The financial giant expressed confidence that Tesla's cutting-edge Dojo supercomputer could propel the electric car manufacturer's market value to nearly $600 billion. This boost would be achieved by accelerating Tesla's entry into the realms of robotaxis and software services.

Tesla, which already holds the title of the world's most valuable automaker, embarked on the production of its Dojo supercomputer in July. This supercomputer is specifically designed to train artificial intelligence (AI) models for self-driving vehicles, and Tesla has committed to investing over $1 billion in the project over the coming year.

The potential impact of Dojo extends far beyond the traditional business of selling vehicles at a fixed price, as pointed out by Morgan Stanley analysts led by Adam Jonas. They envision Dojo enabling Tesla to enter novel markets, where devices equipped with cameras can make real-time decisions based on their visual input. This technological leap raises intriguing questions about the myriad opportunities that could unfold.

In response to this bullish outlook, Morgan Stanley upgraded Tesla's stock rating from "equal-weight" to "overweight," replacing Ferrari's U.S.-listed shares as their "top pick." Additionally, they increased their 12-18 month target for Tesla's shares by an impressive 60% to $400, which would result in an estimated market capitalization of approximately $1.39 trillion. This valuation represents a staggering 76% increase compared to Tesla's current market value of around $789 billion, based on the closing stock price of $248.5 on the preceding Friday. On Monday, Tesla's stock price climbed by approximately 5.7% to reach $262.70.

Adam Jonas, the lead analyst at Morgan Stanley, anticipates that the true value of Dojo will manifest primarily in the realm of software and services. To support this projection, the financial giant raised its revenue estimate for Tesla's network services business to $335 billion by 2040, up from a previous estimate of $157 billion. Jonas expects this business unit to contribute more than 60% of Tesla's core earnings by 2040, nearly doubling its contribution from the year 2030.

When considering Tesla's 12-month forward price-to-earnings ratio of 57.9, it becomes evident that the company is in a league of its own compared to legacy automakers such as Ford (with a ratio of 6.31) and General Motors (with a ratio of 4.56), as reported by LSEG data. This substantial premium reflects the market's strong belief in Tesla's growth potential and innovation in the electric vehicle sector.

Technical analysis

TSLA recently broke out of its downtrend in June, successfully retesting the trading channel, before bouncing off support. The stock now aims to climb to its previous high of $300. Monday’s price action, coupled with a surge in bull volume indicates that TSLA might be heading higher in the short-term. A possible level of resistance is the aforementioned $300 level as well as the $289.24 gap-fill level. Monitoring TSLA's progress in relation to these resistance levels will be crucial for market participants and investors seeking to navigate the stock's immediate future.

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Source: Thomson Reuters. (2023, September 12). Tesla jumps as analyst predicts $600 billion value boost from dojo. Reuters. https://www.reuters.com/business/autos-transportation/tesla-supercomputer-could-boost-ev-makers-market-cap-by-600-bln-morgan-stanley-2023-09-11/