Morgan Stanley just named Tesla as its top pick in U.S. autos in a big way.
The firm's analysts hiked their price target for Tesla on Monday to $465 a share from $280 in a note authored by analyst Adam Jonas.
Citing Tesla's unique position to execute an Uber-like "shared mobility model," Jonas asserts that the company is best suited to boost low automobile utilization rates by successfully harnessing autonomous driving technology. (Tweet This)
"Ten trillion vehicle miles are driven annually. Firms with expertise in autonomous tech and networked machine learning can exploit the inefficiencies in the current model. [Tesla] may be uniquely positioned to dominate. Our PT rises to reflect its potential to lead the revolution in shared mobility," the note reads.
Jonas projects that an autonomous Uber-like shared mobility model could triple the automaker's potential revenues by 2029.
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Seemingly little outside the hypothetical shared-mobility model sparked the 92 percent upside Morgan Stanley's note implies. As for why the upgrade comes today, Jonas pegged the shift on Tesla's outlook to new product offerings due out with Tesla's Model 3 in 2016.
"While the Model 3 is slated to launch as a traditional 'I own it, I drive it' vehicle, we expect a new application could follow within a year," Jonas wrote, adding that Tesla's modeled capex and R&D spending would be 10 times that of Ford, potentially indicating taking the company's product offering in a new direction.
Morgan Stanley's note lays out three stages the automaker has ahead of it before realizing the shared mobility model it predicts. The first goal of a semi-autonomous car with a human driver by 2018 seems the least far-fetched. Second, a near fully autonomous car with a "human operator" by 2025. And third, the one point that is most central to Morgan Stanley's upgrade and $465 price target, "an aggressive phase-in of shared fully autonomous vehicles" by 2025 and beyond.
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The note lists competition, regulation, consumer adoption and execution as potential risks to Jonas' shared-mobility thesis. For investors who reject the thesis, the note claims Tesla is fairly valued at $319.
While the note concedes that Tesla has not said much on the possibility of a shared-mobility model being in the company's future, Jonas wraps up his case with an excerpt from an exchange with Tesla CEO Elon Musk on a recent analyst conference call:
Jonas: First question: Steve Jurvetson was recently quoted saying that Uber CEO Travis Kalanick told him that if by 2020 Tesla's cars are autonomous, that he'd want to buy all of them. Is this a real—I mean, forget the 2020 for a moment—but is this a real business opportunity for Tesla? Supplying cars to ride-sharing firms, or does Tesla just cut out the middleman and sell on-demand, electric mobility services directly from the company on its own platform?
Musk: That's an insightful question.
Jonas: You don't have to answer it.
Musk: I don't think I should answer it.
Jonas: Sometimes you can tell more from the nonanswer than from the answer.
Tesla shares, which have risen over 1,200 percent over the last five years, opened about 5 percent higher on Monday.