Tesla (TSLA) -) shares moved firmly higher Monday following an upgrade from top Wall Street analyst Adam Jonas tied to the potential of the electric-auto maker's DoJo supercomputer.
Morgan Stanley analyst Adam Jonas added 60% to his previous Tesla price target, boosting it to $400 a share, the highest on Wall Street, and lifted his rating to overweight from equal-weight.
He based the moves on the assumption that the DoJo supercomputer could add more than half a billion to Tesla's market value "through a faster adoption rate in Mobility (robotaxis) and Network Services (software as a service)."
Tesla CEO Elon Musk has said DoJo, powered by artificial intelligence, will not only support his own company's drive toward autonomous vehicles but also the company's ability to license its full-self driving technology to major automotive rivals. Musk has identified autonomous driving as the key to future profitability.
Tesla now has data based on around 300 million miles of driving. Musk said the figure will "soon be billions of miles and tens of billions of miles," providing a huge competitive advantage for the company as it ramps up investments in AI and other technologies to harness its potential.
MS's Jonas: Tesla is both car and tech company
"Investors have long debated whether Tesla is an auto company or a tech company," Jonas wrote. "We believe it's both but see the biggest value driver from here being software and services revenue. The same forces that have drive [Amazon Web Services] to reach 70% of Amazon earnings can work at Tesla ... opening up new addressable markets that extend well beyond selling vehicles at a final price."
"The autonomous car has been described as the mother of all AI projects," he added. "In its quest to solve for autonomy, Tesla has developed an advanced supercomputing architecture that pushes new boundaries in custom silicon and may put Tesla at an asymmetric advantage in a $10 trillion (total addressable) market."
Tesla shares were marked 9.2% higher in early afternoon trading Monday to change hands at a six-week high of $271.37 each.
Analyst Munster on self-driving-tech potential
Gene Munster, an analyst at Deepwater Asset Management and a longtime Tesla bull, says licensing Full-Self-Driving technology could generate as much as $20 billion in annual revenue within five years of the first agreement. A 10% market share should generate $100 billion in operating income, Munster said.
"If Tesla is successful at landing one [original-equipment manufacturer], the likelihood that other car makers jump on board is high. It would be a similar dynamic we’ve seen over the past month as seven car makers have signed up to use Tesla’s charging network," Munster said.
Musk, for his part, isn't prepared to wait much longer, even as he described himself as "the boy who cried FSD" by overpromising and underdelivering on its potential.
"I've been wrong in the past. I may be wrong this time (but) I think we'll be better than human by the end of this year," Musk said. "We see a clear path to full self-driving being 10 times safer than the average human driver."
- Get exclusive access to portfolio managers and their proven investing strategies with Real Money Pro. Get started now.
