Tesla shares edged lower in early Tuesday trading, but are still up more than $320 billion since last week's election, as investors reset growth and profit forecasts for the group given CEO Elon Musk's close ties to President-elect Donald Trump and his growing influence on the new Republican-controlled Congress.
Musk, who has spent the past weekend at Trump's home in Palm Beach, has weighed in on everything from cabinet appointments to Federal Reserve independence and is expected to be a key voice that Trump will rely for advice on China trade and domestic technology policies.
Top Wall Street analyst Adam Jonas of Morgan Stanley, in fact, says Tesla (TSLA) could reach a market value of around $1.6 trillion if his bull case for the stock comes to fruition and Musk's involvement with the new administration allows for a repricing of its AI ambitions.
"Investor perception of Tesla’s CEO has shifted significantly over the past week, with Elon Musk’s public support for President-elect Trump positioning him as a prominent voice in the incoming administration," Jonas said in a note published Tuesday.
"Musk's entry into the political sphere has (also) expanded investor thinking around Tesla’s fundamental outlook," he added. "The question now is whether the rerating is temporary or if Tesla will take on a larger role in the US renewable/autonomous industrial complex."
Step into the DoJo
Jonas has long argued that Tesla is based on the host of other business dynamics tied to the sales of its electric vehicles, such as licensing its driver-assistance system, its broader network and mobility services, as well as its battery, energy and insurance divisions.
He's also said that Tesla's Dojo supercomputer, which is powered by artificial-intelligence technologies, could add more than $500 million to Tesla's market value "through a faster adoption rate in mobility (robotaxis) and network services (software as a service)."
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Musk himself touted the profit potential of AI technologies, particularly with respect to the group's ambition to offer self-driving software to its near 7 million global EV fleet, adding that capital spending would likely rise to around $10 billion this year as a result.
"We are going to double down on Dojo and we do see a path to being competitive with Nvidia with Dojo," Musk told investors in July. "We've really got to make Dojo work and we will."
"We hear enthusiasm for all things AI, data centers (but) at the same time, based on our discussions at least, Tesla is very frequently excluded from the potential paths of expression in a portfolio," Jonas said. The analyst noted that around 80% of the group's revenue this year came directly from the sale of elective vehicles.
"Over the next four years we expect to see Tesla’s [total addressable market] aperture expand to far wider domains, many of which are not included in buy-side or sell-side financial models for the company," he added.
Bold bull case
Jonas reiterated his overweight rating and $310 price target on Tesla, but he also laid out a bull case that could take the stock to $500 a share, a 43% advance from current levels and would peg its market value at around $1.6 trillion.
That market move would likely require EV sales of around 8 million units per year, around 400 gigawatt hours deployed through its energy-storage systems, and a collective contribution of around $146 a share from Tesla's software, services, and Full-Self-Driving technology.
"With the current share price around $350 in intraday trading, Tesla shares are now trading at approximately 16 times [enterprise value to adjusted earnings] on our fiscal 2030 forecasts, up from around 11 times last week," Jonas explained. "At $400 the stock would trade at 19 times and a $500 price would bring the valuation just below 24 times."
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Last month Tesla posted stronger-than-expected third-quarter earnings of 72 cents a share, with profit margins widening by nearly two percentage points as the cost of producing its signature EVs fell to a record low and global pricing stabilized.
Tesla also said it expected "slight growth in vehicle deliveries" this year, following last year's record 1.8 million tally. Musk added on the investor call that he saw the potential for a 20% to 30% growth rate in 2025 "notwithstanding negative external events ... like some big war breaks out or interest rates go sky high or something like that."
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"We can't overcome massive force majeure events. But I think with our lower-cost vehicles with the advent of autonomy, something like a 20% to 30% growth next year is my best guess," he added.
Tesla shares were marked 3% lower in early Tuesday trading to change hands at $339.67 each, a move that would still leave the stock up more than 35% over the past six days.
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