Is the Tesla share price worth $810?

‘The logarithmic EV adoption curve brings with it a logarithmic de-adoption curve of ICE. The ICE cube may be melting faster than we realize.’

How long is a piece of string?

How far can you stretch a piece of string before it snaps?

How much is Tesla (TLSA) worth?

Morgan Stanley says $810 per share – slightly below the automaker’s last traded price of $880 per share. Perhaps the market knows something the storied investment bank doesn’t. Or perhaps, the investment bank is just playing catchup with a white-hot market.

That’s a hard game. Tesla’s 738% rise over the last 1-year looks to be fuelled by a few things: Ultra-low interest rates, seemingly never ending confidence in Elon Musk’s abilities to pull off the improbable, improving fundamentals, and a mass of ever growing derivative bets on Tesla’s success.

Despite that rise, many analysts, investment banks and market commentators were caught out. Morgan Stanley, in May 2021, had a bear case price target of just $10 per share on the automaker – on a pre-split basis! The investment bank now values Tesla’s insurance business alone well ahead of that.

By comparison, the broader analyst community remains uncertain of Tesla’s future. The Tesla consensus rating is a HOLD and the stock's consensus price target stands at $311.75 per share – suggesting significant potential downside from current price levels, according to MarketBeat.

But despite recognising that Tesla's market cap is 'roughly equal to all other OEMs on earth combined,' Morgan Stanley is bullish on the stock.

Tesla currently has a market capitalisation of $834.17 billion (a figure which is significantly higher on a fully diluted basis), and trades at 1,743x times earnings.

Of course, Tesla isn’t the only company looking to seize upon the shift towards electric vehicles and a decarbonised future; and as Morgan Stanley points out:

‘Several other teracap names are also entering the market in one way or another. The product of the mass (market cap) and acceleration (investment) of such players is applying tremendous force against the ICE ecosystem.’

Worryingly for ICE manufactures, the investment bank further adds that ‘The logarithmic EV adoption curve brings with it a logarithmic de-adoption curve of ICE. The ICE cube may be melting faster than we realize.’

Despite that, Morgan Stanley's $810 price target is made up of the following components:

  • $331 per share from Tesla's core auto business
  • $69 per share from Tesla Mobility
  • $96 per share from Tesla's powertrain business
  • $44 per share for 'Energy'
  • $37 per share for Tesla's insurance arm
  • $233 per share for Network Services

Of course, Morgan Stanley still sees risks to that price target, citing execution risk, dilution, Chinese and US risks, 'execution risk with multiple factory ramps,' and 'competition from legacy OEMs/Chinese domestics/mega-tech' as some of the key risks facing the company in the short and medium term.

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This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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