Tesla valuation ‘problem’ likely gets worse before better, says Morgan Stanley

Morgan Stanley analyst Adam Jonas says investors “struggle to justify the value of Tesla (TSLA) as much as ever before” nearly 15 years after the company went public, adding that the firm expects this “valuation ‘problem’ gets worse before it gets better.” Most investors value Tesla’s core auto business at between $50 and $100 per share, then “they put their pens down,” but stopping there is “akin to valuing Amazon (AMZN) as solely an online retailer or Apple (AAPL) as a seller of glowing rectangles and earbuds,” the analyst argues. By the mid 2030s, the firm forecasts Tesla’s installed base to approach 50M units and estimates that each $100/month of ARPU generated by this installed base for autonomy, charging, connectivity, upgrades, content, used sales, parts/service, and licensing is worth $80 to $100 per share. The energy storage business is Tesla’s “fastest growing and highest margin hardware business at present,” adds that analyst, who values Tesla Energy at $67 per share. While the firm says it currently does not include a valuation for Tesla Optimus in either its base or bull case, it estimates that every 1% substitution by humanoid of human labor is worth greater than $300B, or around $100 per Tesla share. Morgan Stanley has an Overweight rating and $410 price target on Tesla, adding that “the majority of the company’s current $1.1tn market cap is based on businesses that have either poor disclosure, no disclosure, or that have yet to be launched into the commercial market at all.”