Over the past week investor perception of Tesla’s CEO has significantly evolved. Elon Musk’s public support for President-elect Trump has vaulted Tesla’s CEO to be considered a powerful voice in the incoming administration. Tesla shares have responded by rallying by over 40% to a 2-year high and above our $310 price target. The current share price (just shy of $350 in intraday trading) puts TSLA shares at around 16x EV/EBITDA on our FY30 forecasts, up from approximately 11x last week. At $400 the stock would trade at 19x EV/EBITDA (FY30e) while $500 puts the stock just shy of 24x.

The dichotomy: From our ongoing client discussions, we hear enthusiasm for all things AI, datacenters, renewable energy, robotics and on-shoring. Investors acknowledge the importance of the United States maintaining leadership in such technologies in an increasingly competitive and complex geopolitical environment. At the same time, based on our discussions, at least, Tesla is very frequently excluded from the potential paths of expression in a portfolio. After all, 80% of the company’s YTD revenues are from selling cars and Cybertrucks. As we look ahead to FY25 (and over the next 4 years), we expect to see TSLA’s TAM aperture expand to far wider domains, many of which are not included in buy-side or sell-side financial models for the company. Such a phenomenon is not unprecedented in tech. How many investors predicted that NVDIA would move from a business model dominated by chips for video gaming to the dominant supplier of AI hardware and solutions supporting its status as the world’s most valuable company? How many saw the potential for Apple to move beyond the iPhone, or Amazon beyond selling books online? (NVDIA is covered by Joe Moore, Apple by Erik Woodring, and Amazon by Brian Nowak.)

Investors are faced with a difficult question: To what extent should Elon Musk’s potential relationship with the incoming administration be considered in ascribing a value to Tesla shares? With so many policy variables in play, we are not, at this time, changing our forecasts or implied multiples driving our base case price target. Having said that, we aim to help investors understand the key value drivers for the company and their sensitivity.

Key 2030 assumptions underpinning our current $500 bull case:

• Auto: $90/share. 8mm units (28% unit CAGR vs. FY24 base) with 20% EBITDA margin. Our current base case auto assumption of 5.7mm units by 2030 implies a 21% unit CAGR.
• Energy: $85/share. 400 GWh of ESS deployed (54% CAGR through FY30) with 22% EBITDA margin. Current base case is for 280 GWh ESS deployed by 2030.
• Network Services: $146/share. Recurring software and service revenue. Includes used, parts & service, F&I, charging, FSD and other services. 25mm Tesla MAUs + 5.6mm Licensees, roughly $200/month ARPU with 53 to 55% EBITDA margins.
• Mobility/Ride-Share: $118/share. 1mm units in mobility fleet by 2030, 60k miles/car, $1.75/mile, 25% EBITDA margin. We assume predominantly human supervised well beyond 2030.
• 3rd Party Battery/Powertrain: $61/share. 3.4mm licensee units (12% non-Tesla EV penetration), $50bn revenue, 25% EBITDA margin.
• Humanoids: $0/share. Our current $500 bull case includes no explicit value of robotics/embodied AI beyond the automotive form factor. Among a wide range of assumptions, each 1% of FY24 US labor that could be replaced by Tesla Optimus could be worth approximately $100/share (NPV) to TSLA shares.
• Combined total company FY30 revenue of approximately $550bn with EBITDA over $140bn.

Exhibit 1: Components of $500 Bull Case

Source: Morgan Stanley Research.

Sensitivity analysis by business line: The following exhibit shows the impact on the TSLA share price (NPV/share) by flexing our FY30 assumption across units the units. For example, in autos every 1mm units of FY30 auto sales is worth approximately $10/share to Tesla. 100 GWh of ESS deployed is worth around $20/share. Please reach out to your Morgan Stanley salesperson for our sensitivity model (included in our earnings model) to help run custom scenarios.

Exhibit 2: Hypothetical impacts to TSLA price target by changing 2030 assumptions. Note that we exclude Humanoids from our current TSLA valuation.

Note: Humanoid sensitivity reflects changes to 2040 assumptions.Source: Morgan Stanley Research Estimates

Exhibit 3: Drivers of MS $500 Bull Case PT by Segment (1/2)

Source: Morgan Stanley Research Estimates

Exhibit 4: Drivers of MS $500 Bull Case PT by Segment (2/2) (Humanoid estimates are hypothetical. We do not include in any of our valuation cases for TSLA ).

Source: Morgan Stanley Research Estimates

Tesla is a car company. That is a fact. However, we also view Tesla as a collection of call options on a number of adjacencies including energy, software, infrastructure and physical services (Tesla is the largest new car dealer in the United States), autonomous vehicles (not just cars), robotics and more. The ‘tail’ to TSLA’s TAM can encompass any machine with a camera that moves an any place where electricity is generated and consumed. Many of these call options have exercise dates far out into the future. Many may not be exercised at all. Others may be starting to move into the money right now.

Unwinding the performance discount? For the past 3 years, Tesla has been a laggard vs. other high growth tech cohorts (ie Mag6) due in part to negative earnings revisions within the core auto business.

Exhibit 5: TSLA vs remaining Mag6 over the last three years

Source: FactSet, Morgan Stanley Research.

Exhibit 6: TSLA has underperformed the remaining Mag6 average by 57 %-points over the prior 3 years

Source: FactSet, Morgan Stanley Research.

Tesla Energy shows how fast things can change. Just 4 or 5 quarters ago, very few investors cared at all about the Tesla energy business despite Elon Musk claiming it would be worth more than the auto business. That seemed far-fetched at the time. Then in FY23 things started to change. Tesla storage deployments more than doubled (+125%). This year, they’re on track to more than double again, implying 4Q storage growth (GWh deployed) of at least 180% YoY. 1 Megapack (at 4MWh) can power >130 homes for 24 hours (average home uses 30KWh/24 hour day). 1 Megafactory can produce a storage equivalent of 40GWh… that’s equal to the electricity usage of 1.3 million homes for 24 hours. 1.3 million homes is nearly equal to the number of households in the state of Connecticut. We calculate the profit from 1 Megapack = 100 cars and the profit from 1 Megafactory = the profit from 1 million cars. Tesla energy gross margins are nearly 2x underlying auto gross margins. While still a lot of execution ahead, it is no longer controversial to suggest that Tesla’s energy business (solar + ESS) could be worth more than the auto business.

Autonomy. We believe Gen AI/LLMs may prove to be the 'great unlock' for Tesla's value as an AI power. But there is a continuing debate over the paths (and timing) to monetization. In our opinion, the winners in autonomy (whether in cars or other form factors) will be those firms who can combine capabilities in data, robotics, energy, AI, manufacturing and downstream infrastructure (fleet management, etc). We’ve written a fair amount on the humanoid opportunity but, at this stage, we are letting the market decide how to value this. We believe the humanoids opportunity is far bigger and faster adopting than autonomous cars and will see a greater quantum of capital behind it. We believe Tesla has the capability to benefit from this theme over time.

With respect to unsupervised FSD and ‘Cybercab’, we are optimistic on Tesla’s ability to drive innovation but remain more conservative on timing and do not anticipate regulatory approval of vision-only and unsupervised FSD (with no tele-ops) within the next 24 months. Having said that, Tesla’s ability to clearly demonstrate improvement in the rate of change of their autonomous driving software can move the stock.

The Autonomous Industrial Complex. While investors remain focused on the robotaxi opportunity, we see the intersection of robotics and autonomy having far broader potential relevance across a wide spectrum of machines and devices in embodied AI. Rapid development of autonomous systems is getting the attention of public investors, VCs and national security experts who have a greater appreciation of the ‘dual-use’ of autonomy. Tesla’s ultimate role within national security/government end markets (either directly or indirectly) is not clear at this point. Over time, however, the underlying technologies, systems and supporting supply chains propagated by Tesla may likely expand beyond consumer markets. In a Balkanized world where China is more constrained, who is in a better position to commercialize EVs, batteries (ESS), AVs, smart manufacturing and embodied AI if not Tesla?

It is indeed difficult to quantify whether, and how, Tesla could be affected by Elon Musk’s relationship with the Trump administration. And there may be a number of risks (management time, distraction, potential conflicts of interest, etc). But it is clear the rate of change of Elon Musk’s influence, whether real or perceived, has increased in recent days and potentially in the weeks and months ahead. Setting the United States on a course for EV/AV/Robotics/Renewable independence is going to involve government and industrial partnership on a scale some have compared to the Manhattan Project, US Highway Act or the Apollo Missions. Elon Musk’s emergence from a political ‘outsider’ to having a voice in potential policies may, at some level, accelerate Tesla’s journey beyond autos.