Adam Jonas, a prominent Tesla analyst at Morgan Stanley, has made a significant move by raising his price target for TSLA by 60% from $250 to $400. He also upgraded the stock from equal-weight to overweight and named it his “Sector Top Pick,” replacing Ferrari ($RACE) in that position. This bold call from one of Tesla’s most influential analysts could have a substantial impact on the stock’s performance.
Why does this matter? Jonas is widely considered one of the most influential Tesla analysts, having covered the company since its IPO. His past calls have had a notable impact on Tesla’s stock price, including a 10% increase when he upgraded the stock shortly after Tesla’s S&P inclusion announcement in 2020.
Despite occasional ridicule, Jonas has demonstrated a willingness to embrace long-term thematic aspects of the Tesla investment case beyond current financials. His latest note, which has been leaked online, focuses on the introduction of Dojo, which he believes will accelerate Tesla’s self-driving project and offer potential revenue streams from licensing this technology to external customers.
Key highlights from his note include the emphasis on Dojo’s speed, performance, and cost benefits, potentially adding $500 billion to Tesla’s enterprise value. This value is calculated based on the present value of future cash flows, not near-term earnings or multiples. Morgan Stanley anticipates Network Services revenues reaching $335 billion by 2040, driven by third-party licensing fees and FSD as a service.
In terms of my perspective, while near-term price targets from investment banks are often marketing tools, Morgan Stanley’s analysis aligns with Tesla’s focus on long-term success over short-term gains. Tesla’s earnings will likely move non-linearly, making current earnings multiples less relevant. The key is whether Tesla can achieve its ambitious long-term goals, and Morgan Stanley’s optimistic model provides a vision of the company’s potential.
Ultimately, market efficiency often exceeds expectations, and Tesla’s significant competitive advantages in hardware and software will likely be priced in by the market before substantial earnings materialize. Jonas’ research note may not contain revolutionary insights, but it can act as a self-fulfilling prophecy, potentially driving buying interest and market sentiment in Tesla’s favor.
However, it’s worth considering Adam Jonas’ track record as an analyst. While he has certainly made some notable calls in the past, including upgrades that led to stock price increases, he has also faced criticism for occasionally making extreme predictions, such as suggesting in 2019 that Tesla’s stock could be worth less than $1 when adjusted for splits. While such forecasts were presented as worst-case scenarios, they raised eyebrows and added some uncertainty to his credibility. Nonetheless, Jonas has shown a willingness to embrace long-term themes in the Tesla story, making his latest bullish call a subject of both anticipation and skepticism within the investment community.
In conclusion, Adam Jonas’ recent actions could significantly impact Tesla’s stock, and while his price target adjustments are long-term in nature, they align with Tesla’s overarching strategy for success in the years to come. Investors should consider the long-term outlook and evolving business dynamics when assessing Tesla’s value.