Forget about a mere 15 percent increase in stock value -- how about a 90 percent one? That's how bullish Morgan Stanley analyst Adam Jonas is on Tesla.
In a note this morning, Jonas has increased the price target for Tesla to $465 from $280. (The stock opened at $243 on Monday morning before rising about 4 percent in early trading). The key reason behind this is what he calls "Tesla Mobility, an app-based, on-demand mobility service." The race for autonomous driving is nothing new, with tech giants such as Apple and Google also making a push in this realm, but the report says Tesla is well positioned to get large market share. Jonas is telling clients that "Tesla is uniquely positioned, in our view, to solve the biggest flaw in the auto industry, <4% utilization, via an app-based, on-demand mobility service."
Given the pace of technological development both within Tesla and at rival technology and mobility companies, we would be surprised if Tesla did not share formalized business plans on shared mobility within the next 12 to 18 months... We view this business opportunity as potentially additive to Tesla's existing model of selling human-driven cars to private owners and see potential for this model to conceivably more than triple the company's potential revenues by 2029. That is, selling miles in addition to selling cars... If Tesla wants to make good on its mission to accelerate the world's transition to sustainable transport, we see the move to a shared mobility model as critical...
Here's a look at how this new mobility segment plays into the price target. It adds $244 a share in the bull case scenario, the second largest contributor behind the traditional Tesla Motors.
The report goes on to say that Tesla has five critical attributes a company needs in order to be a successful shared mobility firm, which are:
In terms of a timeline for Tesla Mobility, Jonas says there will be three stages. The first version will be a semi-autonomous car, where there is still a human driver. This would take place in the years of 2018-2021. The second stage is a car that is closer to being fully autonomous, but would still need what they call an "operator." This essentially means that there is no need for human intervention in as much as 99 percent of various situations. Jonas expects this to encompass the years of 2021-2025. The final stage is a phase-in of fully autonomous and shared vehicles, expected to begin 10 years from now.
Jonas points out that Tesla has remained fairly quiet about ride sharing, although he did ask Elon Musk about this on the company's second quarter conference call.
Here's the transcript:
Jonas: First question: Steve Jurvetson was recently quoted saying that Uber CEO Travis Kalanick told him that if by 2020 Tesla's cars are autonomous, that he'd want to buy all of them. Is this a real, I mean, forget the 2020 for a moment, but is this a real business opportunity for Tesla? Supplying cars to ridesharing firms, or does Tesla just cut out the middleman and sell on-demand, electric mobility services directly from the company on its own platform?
Musk: That's an insightful question.
Jonas: You don't have to answer it.
Musk: I don't think I should answer it.
Jonas: Sometimes you can tell more from the non-answer than from the answer.