Tesla Will Be a Leader in Self-Driving Technology: Morgan Stanley

As reported by MarketWatch: Telsa Motors Inc. shares surged about 5% in premarket trade Monday, after Morgan Stanley raised its price target on the shares by 66% to $465 from $280 and said the company is uniquely positioned to dominate in the emerging world of autonomous technology and driving.

The business model of human-driven, privately owned internal-combustion vehicles is fundamentally changing, analysts wrote in a note.

“Given the pace of technological development both within Tesla and at rival technology and mobility companies, we would be surprised if Tesla did not share formalized business plans on shared mobility within the next 12 to 18 months,” they wrote.

That could be followed by a commercial launch some time after the launch of the Model 3, and could form the basis for a Tesla Mobility 1.0 urban transport PODS (Position on Demand Service) in 2018, said the note.

“We view this business opportunity as potentially additive to Tesla’s existing model of selling human-driven cars to private owners and see potential for this model to conceivably more than triple the company’s potential revenues by 2029,” said the note. “That is, selling miles in addition to selling cars.”

Tesla’s current fleet of cars are electric, connected and able to “learn” through over-the-air updates at any time, placing the company far ahead of the established car makers and others attempting to develop self-driving technology.

In addition, Uber CEO Travis Kalanick says his company would like to buy 500,000 self-driving Tesla cars by 2020 if Tesla can produce them.

The company is building unparalleled infrastructure for charging and other services, and can be quickly adjusted to a shared mobility model. The company is introducing sensor and software capabilities in the Model X next month that could set the standard for self-driving technology.

“These are early days, but it is the view of the Morgan Stanley global auto team that Tesla may be best positioned to advance the state of the art in shared autonomy,” said the note.

The price target of $465 represents the midpoint of Morgan Stanley’s new base of $319 and bull case $611 valuation, reflecting its expectation that a mobility app will be announced in the next 12 to 18 months. The target is about 81% above Tesla's current trading level.

Tesla shares have gained 9.3% in the year so far, while the S&P 500 is up 1.2%.