Whether Tesla is just a car company or something more could mean trillions of dollars in stock market value for both the EV maker and Nvidia.
“Tesla remains fiercely debated as it faces earnings pressure…and the business model crosses the chasm from autos towards [artificial intelligence] and robotics,” wrote Morgan Stanley analyst Adam Jonas in a Thursday report.
Pressure is an understatement. Tesla is expected to earn about $2.70 a share in 2024, while two years ago, the consensus call was $6.40 a share. More electric-vehicle competition, higher interest rates, and an aging product lineup have made selling Teslas much harder.
That is why analysts focused primarily on the car business are bearish on Tesla stock. “It’s hard for a car company to not be a car company,” wrote Bernstein analyst Toni Sacconaghi in a recent report, calling the auto industry hypercompetitive and noting that AI breakthroughs can eat away at Tesla’s perceived advantages in robotics and self-driving car technology.
“We lean more towards the sentiment that Tesla is a car company,” Sacconaghi wrote. He rates Tesla shares at Sell and has a target of $120 for the price, which values the company at about $380 billion.
Jonas leans the other way and is one of the few analysts on Wall Street to explicitly value Tesla’s car business and other businesses separately.
Jonas values the car business at $62 a share, or about $200 billion. He says the stationary-battery power business is worth $38 a share and pegs the auto-supply and insurance business at $44 a share. Businesses related to self-driving technology, which Tesla uses AI to train, are worth $166 a share, or $531 billion, he says.
All that adds up to his Street-high $310 price target, which values Tesla at just under $1 trillion.
Jonas sees more than a car company. He doesn’t see the potential for Tesla’s AI lead to be eroded. The company “recently achieved one billion miles traveled for its full self-driving service,” the analyst said in his Thursday report.
The miles are piling up. By 2030, Jonas sees Teslas in service driving one billion miles a day. “From our conversations with AI experts, such a monumental dataset may be an advantage for machine learning and neural net training,” he wrote.
All that driving data would need to be crunched by computers. While Tesla has developed its in-house computing capability called Dojo, it likely would take all the capacity it can get. Morgan Stanley analyst Joe Moore argues that Tesla could become the largest customer for Nvidia’s AI chips.
Nvidia has the chips needed for AI computing. Tesla might have the killer AI application — training cars to drive themselves.
“Tesla’s highly anticipated… Robotaxi day may offer some important clues as to the ongoing business model shift and change of emphasis away from the increasingly over-supplied EV industry,” Jonas wrote.
Tesla CEO Elon Musk tweeted Friday that his company would unveil a robotaxi on Aug. 8. Musk and his managers will work to explain how close Tesla is to achieving full autonomy, what its lead is over the competition, and what it will mean for Tesla’s financial statements.
Before that happens, Tesla will disclose its first-quarter earnings on April 23 and report another quarter of deliveries on July 2. Those events will be more about cars.
The debate over the nature of Tesla and what it is evolving into won’t end soon. The stock closed Thursday with a gain of 1.7% to $174.60, while the S&P 500 and Nasdaq Composite rose 0.7% and 1.7%, respectively. Nvidia stock was up 4.1%.
Write to Al Root at allen.root@dowjones.com