Investors Undervalue Autonomous Tesla's Future

Tesla has lost nearly a third of its value this year, but Morgan Stanley believes that some parts of the Elon Musk company are not well valued by investors, including its autonomous technology unit.

"We believe investors are underestimating / undervaluing Tesla's business operations," Morgan Stanley analyst Adam Jonas said in a note to customers. It is widely followed on Wall Street because of its early bullish call on Tesla, as well as its attention to the growing market of electric vehicles.

Jonas' optimism comes from the fact that the stock is rebounding slowly after its steady fall this year. Tesla shares fell to $ 179 per share in early June, shortly after Jonas held a conference call with investors. He said: "Tesla is not really seen as a growth story". Jonas said Tesla was more like a "credit in distress". restructuring story "but warned that a big tech company like Amazon or Apple is not going to come to the rescue." Tesla shares fell 6% on the day of Jonas' call, prosecutor thus the slippage started when Musk sent an urgent email to employees to reduce their expenses and take "extreme" measures to control them.

But these last few months have not been so bad, in the eyes of Jonas, who noted last week that Tesla continued in May and that it "kept getting ahead". [electric vehicle] competitors. "And on Tuesday, the analyst said that Morgan Stanley's clients" are questioning more and more about the potential value areas of the company's portfolio that may be underestimated by the market. "

Jonah gave a list of the parts of Tesla that he considers undervalued by investors:

• Autonomous technology (autonomous driving)
• Tesla's infrastructure of charging stations
• Solar energy products
• Energy storage products
• Sales of electric vehicle batteries to other manufacturers
• Opportunity of the Chinese market
• The value of government incentives for electric vehicles
• Tesla arrives semi truck

According to Jonas, all these areas have "potential commercial value beyond the manufacture of Tesla vehicles". He believes that the company's "self-sustaining" unit is one of the most undervalued parts, claiming that "many of the investors we talk to do not explicitly include business activities." Tesla's autonomy in their valuation of society ". Jonas estimates that the car industry alone accounts for $ 8.5 billion. Morgan Stanley has a target price of $ 230 per share on Tesla. Jonas estimates that the sector of autonomy accounts for one fifth of the total value of the company at 45 USD per share.

Tesla shares rose 2.9% at Monday close at $ 212.88 per share.

Jonas's investor note title challenges the comparison between Tesla and major automakers in Detroit, as it seeks a technological advantage in the industry.

The automakers have recently "set a precedent by utilizing separate autonomous vehicle business units to attract and retain talent," Jonas said, noting both General Motors and Ford. The first has its "GM Cruise LLC" while the second has its own "Ford Autonomous Vehicles LLC". Jonas said that these entities had allowed companies to attract outside investment, GM Cruise raising funds "like Honda and Softbank", while the Ford unit was receiving an investment from Volkswagen.

This almost self-contained structure allows GM's and Ford's autonomous arms to do four things, according to Morgan Stanley.

"(1) create a currency to attract and retain talent, (2) give more importance to the technological mission for the" mother of all artificial intelligence projects "(3), create new partnership opportunities outside the automotive sector and (4) increases the potential to bring new capital and finance projects to potentially much more attractive multiples, "said Jonas.

Jonas said GM and Ford had created "technology-driven units" because of the "higher urgency needed for traditional industrial enterprises" to compete with technology companies. Tesas is "already widely considered a technological platform," said Jonas, but he thinks that the autonomous unit has a more comparable value than it appears, because it does not constitute a differentiated legal entity. Tesla's standalone technology value comes in the form of hardware, software, and access to large amounts of driving data / miles, Jonas added.