TESLA STOCK IS UP. IT’S ABOUT ‘ANYTHING BUT CARS’ THESE DAYS.
When Morgan Stanley analyst Adam Jonas hosted a bull/bear lunch in New York recently to discuss Tesla, investors wanted to talk about “anything but cars.”
“After establishing that consensus is expecting a 15%-type 4Q gross auto margin … and 10% to 15% volume growth in 2025, there was extremely little discussion about the Tesla core auto business,” wrote Jonas in a report Thursday.
Both numbers look achievable. Tesla posted a third-quarter automotive gross profit margin of about 17%, excluding any regulatory credit sales. And CEO Elon Musk is targeting 20% to 30% volume growth, helped by a lower-price model due early this year.
If cars don’t matter for Tesla stock, then what does?
The answer is artificial intelligence, said Jonas. Investors want to see AI-trained, self-driving Tesla cars on the road. They also want to see more development of Optimus, Tesla’s AI-trained humanoid robot.
Tesla plans to launch a self-driving robotaxi service by the end of 2025. Musk also has suggested that robot sales could start this year. Having both happen is what could drive Tesla stock higher.
Shares already have had an impressive AI-fueled run. Coming into Friday, Tesla stock had risen more than 70% since the company’s Oct. 10 robotaxi event and was up more than 60% since the Nov. 5 presidential election.
Tesla’s robotaxi day outlined the company’s plans for a self-driving car service. Investors expect the incoming Donald Trump administration to accelerate federal rule-making to encourage autonomous-vehicle deployment.
Shares closed up 3.1% at $426.50 on Friday while the S&P 500 and Dow Jones Industrial Average added 1% and 0.8%, respectively. Friday’s gain follows Thursday’s 3.4% drop.
Tesla stock has been on a rollercoaster ride for the past couple of weeks. Shares have reversed direction for 11 consecutive trading sessions, with an average move of more than 3%, up or down.
Jonas rates Tesla shares Buy and has a $430 price target on the stock. The car business only accounts for $89, or 21%, of his target price. For Jonas, “anything but cars” makes some sense.
He values Tesla’s self-driving-related technologies, including robotaxis, at $258 a share, and Tesla’s battery storage business at $66 a share. He also expects Tesla to supply technology to other auto makers eventually, saying that is worth $17 a share.
He doesn’t have a value for humanoid robots. Jonas is waiting to see how the technology, supply chain, and costs develop.
Jonas’s price target is among the higher ones on Wall Street. The average price target for Tesla shares is about $317, according to FactSet.
That is below where shares have been trading, but still values Tesla at $1 trillion, multiples of the combined value of many traditional auto makers. For most of Wall Street, it seems, Tesla is about more than cars.
Write to Al Root at [email protected]
2025-01-17T12:09:34Z
