- Morgan Stanley analysts' bull case for Tesla would see the stock soar to $500 a share.
- They said Tesla's autonomous technology could be the "great unlock" that turns it into an AI giant.
- That trajectory will be more likely if CEO Elon Musk exerts his new political influence in Trump's second term.
Tesla shares have a path to big upside ahead if the electric car company can expand beyond autos and if CEO Elon Musk flexes newfound political muscle in a second Donal Trump presidency, Morgan Stanley analysts said on Tuesday.
The analysts, led by Adam Jonas, forecast a rise to $500 a share in their most bullish scenario, a gain of about 50% from prices on Tuesday afternoon. The stock was trading around $332.45 at 1:58 p.m. ET.
They said that Tesla, with 80% of its year-to-date revenues coming from vehicle sales, is frequently excluded from the enthusiasm surrounding artificial intelligence, datacenters, renewable energy, robotics, and on-shoring.
However, they think that could change in the coming years if Tesla can successfully implement some of its initiatives outside the core car business.
"Tesla is a car company. That is a fact. However, we also view Tesla as a collection of call options," the analysts said in a Monday note. "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."
The analysts point in particular to its energy sector, which is already showing huge growth even though few investors cared about it just a few quarters ago. Last year, Tesla's storage deployments more than doubled, and are on track to do so again this year, the analysts say.
That means it's no longer controversial to suggest Tesla's energy business could soon be more valuable than its auto business, they wrote.
They also see the potential for its autonomous driving capabilities to be the "great unlock" that transforms Tesla into an AI giant.
"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," the analysts said. "We believe Tesla has the capability to benefit from this theme over time."
The emergence of other themes will be helped by Musk's potentially greater political influence in coming years, the analysts say.
Since the election, investors seem to be betting that Musk—and his companies—will benefit from his close ties to the President-elect. Musk became a key Trump ally in the final months of the campaign, donating millions and voicing his support in key swing states like Pennsylvania.
The analysts said it is clear that Musk has gained considerable political influence. If he applies that influence to advance policies to advance EVs, robotics, and renewables, it could accelerate Tesla's journey beyond being just a carmaker.
"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," the analysts say.
Musk said he would be interested in running a new "Department of Government Efficiency" to slash costs and reduce the federal budget.
Morgan Stanley's bullish call comes as Tesla's stock has seen huge inflows amid a broader post-election rally. The stock has risen 34% since the election outcome was called, and has continued trading around a two-year high.