Morgan Stanley Pounds the Table on Tesla Stock

Tesla (NASDAQ:TSLA) has a huge opportunity in its Mobility/Robotaxi segment, and investors should closely monitor this aspect of its business.

That is essentially the opinion of Morgan Stanley analyst Adam Jonas, who thinks the EV leader stands to benefit meaningfully from the progress coming in industries that use “embodied AI.”

The analyst believes Tesla can leverage its leadership in EV hardware to transform vehicle owners into subscribers, generating consistent, high-margin revenue. While Tesla has made some progress in this area, recent advancements in AI and autonomous vehicles – such as Waymo accounting for over 20% of rideshare trips in San Francisco – combined with Elon Musk’s influential role within the Trump administration, are drawing investor attention to the more than 1 billion miles Jonas projects Tesla’s global fleet will travel daily by 2030.

“The scale and complexity of the data (the collective global light vehicle fleet travels a distance of nearly 2 light years annually) combined with stringent automotive safety requirements (and Elon’s ability to spearhead the development of such standards in AV) make the global mobility market, and Tesla uniquely, a relevant expression of the embodied AI investment theme,” Jonas went on to say.

That said, it won’t happen overnight. While Jonas anticipates the first introduction in a city for Tesla’s unsupervised autonomous vehicle fleet in 2026, his Tesla Mobility forecast does not assume widespread deployment of autonomous vehicles until after 2030. While a national reassessment of self-driving policies looks inevitable with the incoming administration, the fact is Tesla still faces substantial challenges related to technology, testing, and the permitting process needed for near-term commercialization. Additionally, Jonas expects U.S. states and metropolitan areas will still have a significant role in shaping the timeline and conditions for final deployment.

Further down the line, however, Jonas expects the Tesla Mobility Fleet to be everywhere. His base case calls for a Tesla Mobility Fleet of 7.5 million vehicles by 2040, generating revenue of $1.46 per passenger mile with a 29% EBITDA margin. For comparison purposes, the Morgan Stanley Internet team reckons that Waymo operates at approximately $2.40 per mile, depending on geography, the same as Uber’s U.S. gross bookings. To achieve large-scale consumer adoption of autonomous ridesharing, Jonas believes substantial cost reductions compared to current rideshare pricing will be necessary, alongside significant advancements in the safety and performance of autonomous systems. If Tesla’s robotaxi fleet achieves full U.S. deployment, Jonas forecasts Tesla Mobility miles driven will account for 10% of U.S. Level 4+ and Level 5 autonomous miles by 2030, rising to 17% by 2035 and 28% by 2040.

That is quite ambitious, with Jonas conceding that his long-term projection of millions of robotaxis in operation by 2040 “expands the total mobility market orders of magnitude greater than projections of the size of the human-operated rideshare market.”

Nevertheless, it is an opportunity that merits a new price target, which Jonas raises from $400 to $430, suggesting the stock could climb 8.5% in the months ahead. In a bullish case scenario, according to Jonas, TSLA could rise as high as $800, implying a ~102% upside from current levels. Naturally, Jonas rates the stock as Overweight (i.e., Buy), while giving it a ‘Top Pick’ designation. (To watch Jonas’ track record, click here)

Tesla elicits a wide spectrum of opinions most of the time and that is also the case right now. Based on a mix of 13 Buy recommendations, 12 Holds, and 9 Sells, the stock claims a Hold (i.e. Neutral) consensus rating. Most think the shares have overshot somewhat; going by the $323.56 average price target, a year from now, the stock will be changing hands for an 18% discount. (See Tesla stock forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.