According to Morgan Stanley (NYSE:MS), Tesla Motors, Inc.’s (NASDAQ:TSLA) stock price has serious upside potential. Adam Jonas, analyst at Morgan Stanley, raised his price target for Tesla from $280.00 to $465.00, which is 91.2% higher than Friday’s closing price of $243.15. (Source:Bloomberg, August 17, 2015.)
Tesla’s shares opened more than five percent higher on Monday morning, before settling down to a 4.44% gain at $253.99 per share at around 2:30 p.m. E.T.
The main reason for the massive increase in Tesla’s price target is what Adam Jonas calls “Tesla Mobility, an app-based, on-demand mobility service.” According to the analyst, Tesla is positioned to capture a significant market share in the upcoming autonomous driving industry.
Tesla Mobility will come in three stages, according to the analyst. The first stage would take place between 2018 and 2021 and involves a semi-autonomous car, in which a driver would still be needed. The second stage, between 2021 and 2025, would come with cars that are almost fully autonomous but would need an “operator” for certain situations. The third and final stage, which would take place after 2025, would be an age of fully autonomous cars and shared vehicles.
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The report suggests there are five critical attributes for a firm to be successful in the shared autonomous vehicle business: vehicle design and engineering, leadership in connected cars, autonomous cars/software expertise, battery/electric powertrain expertise, and proprietary infrastructure network. Judging by these criteria, Tesla’s position looks solid: all their cars are electric, connected, and can receive firmware updates over-the-air.
During Tesla’s most recent earnings call, Adam Jonas asked Elon Musk about on-demand electric mobility services. After a few seconds of pause, Elon Musk said “That’s an insightful question.” And Jonas said, “You don’t have to answer it.”
To which Musk replied, “I don’t think I should answer it.”
The key takeaway is Jonas’s comment on Musk’s response: “Sometimes you can tell more from the non-answer than from the answer.”
Although Tesla has not made any official announcement on ride sharing plans, Adam Jones believes the company will unveil formalized business plans on shared mobility in the next 12 to 18 months.