Morgan Stanley, a global leader in the finance sector, has made a bold move by shifting its rating on Tesla (TSLA:NSD) to “Overweight.” This positive action is justified by Tesla’s expanding software and services revenue. It is expected to represent the company’s future competitive advantage. This article will highlight the influence of this rating on Tesla stock forecast.
Software-Led Transformation
According to analyst Adam Jonas, this strategic shift towards software is similar to the course that led Amazon’s (AMZN:NSD) AWS to represent a significant 70% of the company’s overall earnings before interest and taxes (EBIT).
Reason Behind Bullish Stance:
Morgan Stanley’s optimism about Tesla’s future relies largely on the tech giant- Dojo. This specialized supercomputer was designed in-house by Tesla to train the full self-driving system in every Tesla vehicle.
The Game-Changer: Dojo
The pivotal issue Tesla faces is the relentless demand for computational power and NVIDIA (NVDA:NSD) GPU clusters needed for training its self-driving cars. Unfortunately, the company struggles to procure an adequate supply of these crucial components. The Dojo project represents a strategic solution aimed at creating a more efficient system tailored precisely to Tesla’s requirements, thus avoiding the hefty 60% gross margin typically enjoyed by suppliers.
Tesla Stock Forecast: Future Value
Morgan Stanley boldly predicts,
“We believe that Dojo can add up to $500 billion to Tesla’s enterprise value, expressed through a faster adoption rate in Mobility (robo taxi) and Network Services.”
Tesla Stock Forecast:
As per the Tesla stock forecast by 30 analysts, the consensus target price for Tesla stands at $234.35 over the next 12 months. This consensus rating leans towards “Buy.” Stock Target Advisor’s analysts are”Slightly Bullish” on TSLA stock based on 10 positive signals and 5 negative signals.
As of the last closing, Tesla’s stock price was $248.50. Over the past week, the stock has witnessed an increase of 1.42%. Zooming out to the past month, it’s up by 1.29%. However, in the last year, the stock price has seen a downturn of -17.08%.
Conclusion:
Morgan Stanley’s recalibration of Tesla’s rating to “Overweight” highlights profound confidence in the company’s software and services potential, primarily through the game-changing Dojo project. The vision is clear: leverage technology to unlock new markets beyond traditional vehicle sales. Moreover, the ambitious estimate that Dojo could add a staggering $500 billion to Tesla’s enterprise value underscores the transformative impact of software in the automotive industry.
