Deeply bound to "Trump 2.0," is a $500 Tesla not a dream?

The dust has settled on the U.S. elections, and as Elon Musk's ties with Trump deepen, Tesla's prospects are being re-evaluated by investors. Morgan Stanley has even set a bullish price target of $500 for Tesla.

On November 11, Morgan Stanley's latest research report indicated that the market is optimistic about Tesla's long-term potential in autonomous driving, renewable energy, and artificial intelligence. In a bullish scenario, the company's stock price could rise to $500 in the next 12 months.

Recently, Musk's alignment with Trump has propelled Tesla's stock price to soar about 40%, reaching a two-year high and exceeding Morgan Stanley's target price of $310. Currently, Tesla's stock price of $350 gives the company a valuation multiple (EV/EBITDA) of 16 times. The report predicts that if the stock price reaches $400, the valuation multiple will rise to 19 times, and at $500, it will approach 24 times.

As Musk's political influence grows, Tesla may play an increasingly important role in the future of renewable energy, autonomous driving, and robotics in the U.S. The report notes that while it is difficult to quantify Musk's relationship with the Trump administration's impact on Tesla, Musk's rise from a political "outsider" to a potential key figure in policy-making could accelerate Tesla's development to some extent.

Energy, automotive, and mobility businesses jointly support the $500 target

Morgan Stanley stated that in the next 12 months, in a bullish scenario, Tesla's stock price is expected to challenge $500; in a base case scenario, Tesla's stock price may hover around $310; in a bearish scenario, Tesla's stock price could drop to $100.

The report mentioned the main driving factors and key assumptions for Tesla's $500 bullish target, including a contribution of $90 per share from the automotive business and $85 per share from the energy business:

• Automotive Business: It is expected that by 2030, Tesla will sell 8 million vehicles, with a compound annual growth rate of 28%, contributing $90 per share.
• Energy Business: It is expected that by 2030, Tesla's energy storage systems (ESS) will deploy 400 GWh, with a compound annual growth rate of 54%, contributing $85 per share.
• Network Services: Including software, charging, and Full Self-Driving (FSD) recurring revenue, contributing $146 per share.
• Mobility/Shared Mobility Services: It is expected that by 2030, there will be a fleet of 1 million vehicles, contributing $118 per share
• Third-party battery and power systems: It is expected to provide batteries and power systems for 3.4 million non-Tesla electric vehicles by 2030, contributing $61 per share.
• Humanoid robot business: It is expected to contribute $0 per share by 2030. This business is projected to potentially contribute about $100 per share by 2040.

A few quarters ago, investors showed little interest in Tesla's energy business, but this situation changed in 2023. The deployment of Tesla's energy storage systems grew by 125% within a year and is expected to double again this year. Musk's previous claim that Tesla's energy business would be more valuable than its automotive business is also being validated. Morgan Stanley stated that the gross margin of Tesla's energy business (solar + storage) is nearly twice that of its automotive business.

In the field of autonomous driving, Musk's autonomous driving technology and "Cybercab" plan still face regulatory challenges.

Research reports indicate that it remains unclear whether Tesla will obtain approval for unsupervised full autonomous driving within the next two years, but advancements in its software technology may still drive up stock prices. Although Tesla's relationship with the Trump administration could become a potential benefit, there is still debate in the market regarding the monetization path and timing of Tesla's autonomous driving technology and robotics business.

How will political influence change Tesla?

The research report points out that while it is difficult to quantify Musk's relationship with the Trump administration's impact on Tesla, it is evident that Musk's influence is rapidly increasing. If the U.S. moves towards independence in electric vehicles, autonomous driving, robotics, and renewable energy in the future, Tesla may play a key role in this process. Some even compare this shift to the Manhattan Project, the U.S. Highway Act, or the Apollo moon landing program.

Morgan Stanley stated, Musk has risen from a political "outsider" to a potential key figure in policy-making, which may accelerate Tesla's development beyond the automotive sector to some extent.