Tesla stock: Shares rise on Morgan Stanley upgrade, citing 'internet of cars' is real opportunity

·Markets Reporter
·2 min read

Tesla (TSLA) received an Overweight rating from Morgan Stanley’s Adam Jonas on Wednesday on the basis of the electric vehicle maker’s software and services business.

This is the first time since 2017 that Morgan Stanley has lifted Tesla’s rating to the equivalent of a Buy. Jonas also raised his price target on the stock to $540 from $360. That’s about 22% upside from where the stock closed on Tuesday.

"Tesla is on the verge of a profound model shift from selling cars to generating high margin, recurring software and services revenue,” wrote Jonas in a note investors.

“To only value Tesla on car sales alone ignores the multiple businesses embedded within the company,” he added.

Brenner, Italy - May 8, 2016: Tesla charging stations are located throughout EU to accommodate owners of the electric car.
Brenner, Italy - May 8, 2016: Tesla charging stations are located throughout EU to accommodate owners of the electric car.

Jonas cites Tesla’s Network Services, which includes autonomy (full self driving or FSD package), infotainment and performance upgrades. He also notes services like supercharging, maintenance packages and telematics.

“It is becoming clear that like many other technology firms Tesla is using it’s growing fleet of hardware and services to ‘turn on‘ new revenue opportunities ... services that are far reaching, high margin, regularly recurring, and services that ultimately improve the user experience and stickiness of the platform,” wrote Jonas.

“The internet-of-cars opportunity is real and in our opinion is a prerequisite to unlock further upside to the stock,” wrote Jonas.

The upgrade comes a day after Tesla soared 8% on news that the EV maker is set to join the S&P 500 (^GSPC).

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Ines covers the U.S. stock market. Follow her on Twitter at @ines_ferre

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