Morgan Stanley Maintains Equalweight on Tesla, $400 Price Target

Morgan Stanley analyst Andrew Percoco reiterated an Equalweight rating and $400 price target on Tesla (NASDAQ: TSLA).

“Our Morgan Stanley Freight Transportation team published an Insight reinforcing their bullish view on the prospects for Autonomous Trucking and its transformative power for the Freight Transportation industry.

After a decade spent on technology development, the debate in the final 12-18 months (until the start of serial production) shifts to the commercialization pathway.

Updated TAM assumptions show that the opportunity remains significant (the TAM ranges from $0.5-1.1 tn in the US alone by 2041), updated TCO math shows that the ROIC remains very attractive (~20% net cost savings primarily driven by labor, fuel and insurance savings which means an autonomous fleet should be 6-8x as profitable as a human-driven fleet today under the base operating/utilization case) and our proprietary surveys plus AlphaWise geolocation analysis breaks down some popular myths regarding adoption obstacles, while highlighting remaining friction points.

In collaboration with the team, we built an economic analysis for an autonomous EV truck vs. a human driver, and developed a new Tesla Semi model, assuming a tech licensing fee per mile with their TAM sizing analysis and layered it into our Bull Case for Network Services, adding $20/shr to our Bull Case (now $840).

Tesla can generate ~$12-18k/month from its autonomous trucking software ($0.85-$1/mile subscription fee x 18k miles driven per month). This compares to ~$100/month for FSD on consumer vehicles today.

If Tesla reaches 82k Semis on road by 2040 (13.5% share of the autonomous addressable market), that would represent $17bn of software revenue and ~$7.5bn of incremental EBIT (10% upside to our base case) – note that this does not include the upfront sale of the vehicle or incremental revenues for Tesla charging.

Recall, Tesla originally outlined a manufacturing target of 50,000 Semi trucks per year, therefore assuming 80k will be deployed in total over the next ~15 years is a conservative starting point, in our view.”

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