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Shares of Tesla Inc. TSLA,
are up 0.9% in morning trading on Wednesday after Morgan Stanley analyst Adam Jonas overweighted the stock equally. It also raised its price target from $ 360 to $ 540. Jonas wrote that Tesla is “on the verge of a major model change from selling cars (volume x price) to generating recurring high-margin software and service revenue.” He argued that the company’s automotive business provides an “entry ticket to unlock much more [total addressable markets]. “The company already derives service revenue from things like premium infotainment and performance upgrades, and Jonas estimates these companies today account for around 1% to 2% of Tesla’s revenue. by 2030, services could account for over 6% of revenue and 18% to 20% of earnings before interest, taxes, depreciation and amortization, he said. “Evaluating Tesla solely on car sales ignores multiple activities integrated into the business and ignores the long-term value creation resulting from the monetization of Tesla. core strengths, with world-class software and ancillary services, ”Jonas wrote. He argued that the company benefits from a “double flywheel” because of its leadership position in the electric vehicle market, which allows Tesla to “lead the industry in lowering the prices of its products” while seeking to turn vehicle owners into “subscribers” to Tesla services. Tesla shares have gained 18% in the past three months, the S&P 500 SPX,
increased by 6.5%.
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