“If Dojo can help make cars ‘see’ and ‘react,’ what other markets could open up? Think of any device at the edge with a camera that makes real-time decisions based on its visual field.”
The Wall Street brokerage upgraded its recommendation on Tesla’s stock to “overweight” from “equal-weight” and made it their “top pick,” replacing Ferrari’s U.S.-listed shares.
Tesla shares rose nearly 6.2 percent at $262.63 in premarket trading.
Morgan Stanley raised its 12-18 month target on Tesla’s shares by 60 percent to $400 — the highest among Wall Street brokerages as per LSEG data — which, it estimated, would give the EV maker a market capitalization of about $1.39 trillion.
That compares with its current market value of about $789 billion, after the stock closed at $248.5 on Friday.
Jonas expects Dojo to drive the most value in software and services.
Morgan Stanley raised its revenue estimate from Tesla’s network services business to $335 billion in 2040, from $157 billion earlier.
Jonas expects the unit to account for more than 60 percent of Tesla’s core earnings by 2040, nearly doubling from 2030.
“This increase is largely driven by the emerging opportunity we see in third-party fleet licensing, increased ARPU (average monthly revenue per user).”
Tesla has been mentioning how Dojo gives it an edge in AI and self-driving technology since at least 2021. In July this year, CEO Elon Musk told investors that the carmaker plans to invest more than $1 billion on the project by the end of 2024.
That base-case target from Morgan Stanley would put the stock near its record close of $409.97 in November 2021. That makes the firm a notable outlier: The average price target among analysts tracked by Bloomberg is $268.42.
“The more we looked at Dojo, the more we realized the potential for underappreciated value in the stock,” the Morgan Stanley analysts said.
Reuters and Bloomberg contributed to this report.