Tesla stock has undoubtedly experienced a rollercoaster ride over the past year, and in fact, the past couple of years. As we approach the end of 2023, with just a few trading days left, the shares have remarkably surged by over 110% after a staggering 65% drop in 2022. This extreme volatility in Tesla’s stock has left investors and analysts grappling with the challenge of predicting what the future holds.
Looking ahead to 2024, Morgan Stanley analyst Adam Jonas believes that it will be another year riddled with volatility and idiosyncratic factors that will influence Tesla’s stock performance. By “idiosyncratic,” Jonas refers to the notion that factors beyond electric vehicles (EVs) alone will play a significant role. Notably, there is no high-volume product release on the horizon, with estimates suggesting that the new Cybertruck will ship fewer than 100,000 units. Furthermore, increasing competition in the EV market poses a threat to Tesla’s market share, with models like the all-electric Chevy Blazer and the more affordable Chevy Equinox from General Motors gaining traction.
While these developments may seem bearish at first glance, it is crucial to recognize that automotive and EV fundamentals do not always directly correlate with Tesla’s stock performance. To put things into perspective, Jonas poses an intriguing question: “If I had told you a year ago that Tesla’s forward consensus earnings-per-share estimates for 2024 would be revised down by nearly 50%, would you have predicted that the stock would nearly double?” Surprisingly, this scenario has played out precisely as described.
There are additional factors that can influence Tesla shares in the coming year, according to Jonas. Firstly, he suggests keeping an eye on the development of the Tesla robot Optimus, specifically designed to tackle repetitive, dangerous, and unattractive tasks. Additionally, Tesla’s Dojo computing platform, which is utilized for training its autonomous driving features, may find applications outside the automotive realm. Drawing a parallel to Amazon Web Services’ immense success within Amazon, Jonas posits that similar forces could propel Tesla in non-automotive markets. Finally, there is potential for Tesla to establish partnerships with other car manufacturers by supplying them with battery or autonomous driving technologies. Elon Musk, Tesla’s CEO, hinted back in July that a major automaker was considering licensing Tesla’s self-driving tech.
As we approach 2024, one thing remains certain—Tesla’s stock will continue to captivate both investors and analysts as they navigate the ever-changing landscape of the EV industry and beyond.
Tesla’s Potential for Growth in Various Business Segments
Tesla, the leading electric vehicle (EV) manufacturer, has the potential to drive significant growth in multiple business segments, including robotics, artificial intelligence (AI), and self-driving technology licensing agreements. While it may be optimistic to expect all three developments to occur by 2024, industry expert Jonas remains confident in Tesla’s future. He rates Tesla shares as a Buy with a target price of $380.
According to Jonas, Tesla’s car business alone holds substantial value, estimated at $86 per share. His valuation is based on the projection that Tesla will sell approximately 7.4 million cars by 2030, with expectations of selling around 1.8 million cars by 2023. Additionally, he values Tesla’s self-driving robotaxi business at $82 per share. The software business, which includes self-driving technology sold to Tesla drivers, is valued at $115 per share. Furthermore, Jonas estimates Tesla’s energy business, encompassing solar roofs and battery storage, to be worth around $48 per share. The remaining value comprises the sale of insurance and technologies to other car companies.
As per FactSet’s data, Jonas currently holds the highest target price on Wall Street for Tesla. The top five price targets among major brokers place the value of Tesla stock at approximately $340 per share, indicating a market capitalization of roughly $1.1 trillion. Conversely, the bottom five price targets average at $120 per share, implying a market capitalization of about $380 billion.
The span between the highest and lowest price targets, known as the bull-bear spread, stands at $220, representing around 85% of Tesla’s current stock price. This spread also corresponds to a market capitalization of about $700 billion based on Tesla’s outstanding shares, which total roughly 3.2 billion. In comparison, Microsoft’s top-bottom price target difference amounts to $100 per share, representing less than 30% of the current price and translating to a market value of approximately $750 billion based on Microsoft’s outstanding shares of around 7.5 billion.
It is clear that Wall Street faces more difficulty in accurately valuing Tesla, the EV industry leader, compared to the well-established software giant, Microsoft.
Jonas’ report is likely contributing to the positive market sentiment towards Tesla. As of midday trading on Wednesday, Tesla’s stock has risen by 2.1%, while the S&P 500 and Nasdaq Composite have experienced more modest gains of 0.1% and 0.2% respectively.
