Tesla (TSLA, Financials) remains a top investment pick for Morgan Stanley despite recent declines in sales trends, according to a research note from the bank.
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The company expects Tesla to grow into artificial intelligence and robotics, therefore extending its market prospects, beyond its basic automobile industry.
Beyond conventional vehicle sales, especially in AI-driven physical applications not yet fully accounted for in financial models, Morgan Stanley analyst Adam Jonas said Tesla's market potential stretches. He highlighted the company's robotics effortsincluding humanoid robotsas a potential source of large cash and would help position Tesla leading edge technologically.
The research report emphasizes how well Tesla can create fresh income sources by using its current knowledge in artificial intelligence, manufacturing, and automation. Jonas sees Tesla's long-term expansion being facilitated by its emphasis on software, energy solutions, and autonomous technologies. Moving Tesla beyond its reputation as a vehicle maker and into a diversified technology corporation, the development into robotics might provide a new path for its total addressable market.
Assuming Tesla produces 7 million cars by 2030 and achieves an 18% earnings before interest, taxes, depreciation, and amortization margin, Morgan Stanley has a bull case price objective of $800 per share for the business. The company also gives Tesla's fledgling companiesincluding mobility and network servicesgreat importance. Based on a 75% attach rate and an average income per user of around $280 per month, the note projects Tesla Network Services may be valued at $248 per share by 2040. Given a 12-million-unit fleet with a 45% EBITDA margin by 2040, Morgan Stanley also values Tesla's mobility and ridesharing sector at $263 per share.
According to Morgan Stanley, Tesla's development into robotics and artificial intelligence together with its current leadership in electric cars might provide long-term growth prospects. Notwithstanding temporary sales swings, the corporation sees these advances as main determinant of its future success.
This article first appeared on GuruFocus.