Tesla’s (NASDAQ: TSLA) stock may be headed for rougher valuation terrain before it climbs higher, according to Morgan Stanley analyst Adam Jonas.
In a research note published on Monday, May 19, Jonas reaffirmed a $410 price target on Tesla, despite mounting concerns about how the electric vehicle giant is being valued.
At the time of publication, Tesla shares were trading at $339.64, down 2.95% on the day. That puts Jonas’s price target 20.7% above current levels, signaling upside potential—but not without significant caveats.
Jonas didn’t mince words: investors “struggle to justify the value of Tesla as much as ever before” nearly 15 years after its IPO. And in his view, this valuation “problem” is likely to “get worse before it gets better.”
Why Tesla has an ‘Overweight’ rating
While Tesla’s $1.1 trillion market cap paints the picture of a dominant tech-and-transportation hybrid, Jonas notes that most investors only assign a value of $50 to $100 per share to Tesla’s core auto business. “Then they put their pens down,” he says. But to stop there, he argues, is “akin to valuing Amazon (NASDAQ: AMZN) as solely an online retailer or Apple (NASDAQ: AAPL) as a seller of glowing rectangles and earbuds.”
Morgan Stanley believes the lion’s share of Tesla’s current valuation comes from undeveloped, undisclosed, or early-stage businesses, including autonomy, AI services, energy, and robotics. The lack of clear reporting on these segments only adds to the difficulty in modeling future cash flows, according to Jonas.
Looking ahead to the mid-2030s, Morgan Stanley forecasts Tesla’s installed vehicle base could reach 50 million units. For every $100 per month in ARPU (average revenue per user) Tesla generates through software, connectivity, service, upgrades, and content, the firm estimates an additional $80–$100 in share value.
Tesla Energy is overlooked says Morgan Stanley
One overlooked bright spot: Tesla Energy. Jonas calls it the company’s “fastest growing and highest margin hardware business at present,” assigning it a value of $67 per share. Yet it’s a segment that receives minimal attention compared to Tesla’s EV headlines.
Morgan Stanley’s analysis also touches on Tesla’s humanoid robot project, Optimus. While it isn’t factored into the base or bull case valuation, the firm suggests that if humanoids were to replace even 1% of global labor, it could add over $300 billion in value, translating to an estimated $100 per share.
Jonas maintains an Overweight rating on the stock but makes clear that the current valuation hinges less on Tesla’s car sales and more on the success of businesses that “have either poor disclosure, no disclosure, or that have yet to be launched into the commercial market at all.”
Ultimately, Tesla stock still has room to run, but Morgan Stanley is warning investors that the path forward may involve more questions than answers. With the stock still trading nearly 21% below the firm’s $410 target, Jonas is asking the market to think beyond cars, and to start valuing what hasn’t been built yet.
Featured image via Shutterstock
