On Wednesday, Morgan Stanley (NYSE:MS) reaffirmed its confidence in Tesla, Inc. (NASDAQ:TSLA), keeping an Overweight rating and a $310.00 price target on the electric vehicle and clean energy company's shares. The investment firm's valuation of Tesla stock is based on a detailed forecast of the company's business segments and their expected performance by the year 2030.
The price target set by Morgan Stanley is a sum of various components of Tesla's business. The core Tesla Auto business is valued at $67 per share, assuming the company will sell 6.1 million units by 2030. This valuation uses a weighted average cost of capital (WACC) of 9.0% and an exit EBITDA multiple of 13 times, with an expected EBITDA margin of 18.4%.
Tesla's mobility service, which includes ride-sharing and autonomous driving features, is projected to contribute $61 to the share price. This is based on a discounted cash flow (DCF) analysis with an estimate of approximately 158,000 cars operating at $1.8 per mile by 2030. Additionally, Tesla's role as a third-party supplier of electric vehicle components and systems is valued at $39 per share.
The firm's energy generation and storage business, which includes products like solar panels and Powerwall batteries, adds another $40 to the share price. Tesla's foray into the insurance market is seen as a smaller contributor, adding $5 per share to the valuation.
Lastly, the network services division, which could encompass software, entertainment, and other digital services provided to Tesla's user base, is the most significant single contributor at $100 per share. This last component assumes 15.4 million monthly active users (MAUs) and an average revenue per user (ARPU) of $180 by 2030, applying a 50% discount to the valuation.
Morgan Stanley's analysis concludes that at the $310 price target, Tesla's stock would trade at approximately 14.8 times the estimated 2030 enterprise value to EBITDA (EV/EBITDA). This multiple reflects the firm's expectations of Tesla's growth and profitability in the coming decade.
InvestingPro Insights
As Morgan Stanley maintains its optimistic stance on Tesla, Inc. (NASDAQ:TSLA), recent data from InvestingPro provides additional context for investors considering the electric vehicle giant's stock. Tesla holds a commanding market capitalization of $461.4 billion, underscoring its significant presence in the industry. Despite notable volatility, with the stock price experiencing a notable decline over recent months, Tesla remains a prominent player in the Automobiles sector. Investors should note the company's P/E ratio, which stands at 30.62, indicating a premium valuation relative to near-term earnings growth.
InvestingPro Tips highlight that Tesla's balance sheet is robust, with liquid assets that exceed short-term obligations and cash flows that can sufficiently cover interest payments. However, analysts have tempered their earnings expectations for the upcoming period, with 22 analysts revising their earnings downwards. For those looking to delve deeper into Tesla's financial health and future prospects, InvestingPro offers additional insights. There are 23 more InvestingPro Tips available for Tesla, which can be accessed through the platform. To enrich your investment analysis, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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