The forward price-to-earnings ratio for Tesla over the next 12 months stands at 57.9, significantly surpassing the ratios of traditional U.S. car manufacturers, with Ford and General Motors having ratios of 6.31 and 4.56, respectively.
In a recent analysis, Morgan Stanley experts have forecasted a monumental increase, nearly USD 600 billion, in Tesla’s market capitalization. This surge is anticipated to be driven primarily by the introduction of robotaxis and a boost in its software services, facilitated by Tesla’s newly minted Dojo supercomputer.
Commencing its operations in July, the EV giant initiated the production phase of the Dojo supercomputer. This supercomputer is designed to be the powerhouse behind the training of artificial intelligence (AI) models instrumental in developing autonomous vehicles. With an investment exceeding USD 1 billion for the Dojo project through the forthcoming year, Tesla is bracing to revolutionize the automotive sector and potentially other markets.
Morgan Stanley’s research team, by Adam Jonas, predicted in a recent report that Dojo could potentially pave the way for Tesla to tap into lucrative markets that “extend well beyond selling vehicles at a fixed price.” The prospective reach of Dojo is not confined to the automotive industry. As Jonas speculated, “If Dojo can help make cars ‘see’ and ‘react,’ what other markets could open up? Consider the vast array of devices equipped with cameras making real-time determinations based on visual inputs.”
This new development has encouraged the Wall Street brokerage to escalate its rating of Tesla stocks to “Overweight” from a previously held “Equal-weight” position, simultaneously christening it as their “top pick”, a title earlier bestowed upon the U.S-listed shares of Ferrari.
Before the markets opened, Tesla’s shares showed an upward trend, registering a nearly 5.7% increase, priced at USD 262.63. This stance by Morgan Stanley also witnessed a significant 60% uplift in the 12-18 month target price for Tesla’s shares, positioning it at USD 400 – the zenith amongst Wall Street brokerages, according to LSEG data. This valuation would potentially catapult Tesla’s market cap to an estimated USD 1.39 trillion, a substantial leap from its current USD 789 billion valuation as of last Friday’s close at USD 248.5.
Adam Jonas maintains an optimistic outlook for the Dojo project, projecting it to be a cornerstone in propelling value primarily in the software and services segment. Consequently, Morgan Stanley has revised its revenue predictions for Tesla’s network services sector to USD 335 billion by 2040, a marked increase from the prior estimation of USD 157 billion. By 2040, Jonas anticipates this unit to constitute over 60% of Tesla’s core earnings, a figure nearly double the projection for 2030.
He attributed this escalation to “the emerging opportunity we see in third-party fleet licensing, coupled with an increase in ARPU (average monthly revenue per user).”
Tesla continues to lead in the financial spectrum, boasting a 12-month forward price-to-earnings ratio of 57.9, distinctly outpacing traditional U.S. automakers such as Ford and General Motors, which stand at 6.31 and 4.56, respectively.
