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Morgan Stanley shifted to an Overweight rating on Tesla (NASDAQ:TSLA) on the view that the biggest value driver looking ahead is the company’s software and services revenue. Analyst Adam Jonas said that the same forces that have driven Amazon’s (AMZN) AWS to reach 70% of the company’s total EBIT can work for Tesla, and help it open up new addressable markets that extend well beyond selling vehicles at a fixed price.
A major part of Morgan Stanley’s bullish thesis on Tesla’s (TSLA) tech advantage is tied to Dojo, which is the purpose-built supercomputer designed in-house by Tesla to train the full-self-driving system that sits inside every Tesla vehicle.
Crucially, Tesla (TSLA) management has said it needs as much compute power/NVIDIA GPU clusters it can get its hands on, but cannot physically secure the amount of chips necessary to train cars. The Dojo play is based in part on the rationale that the company can develop a more efficient system for their specific needs while not funding a supplier’s 60% gross margin.
“We believe that Dojo can add up to $500bn to Tesla’s enterprise value, expressed through a faster adoption rate in Mobility (robotaxi) and Network Services.”
Morgan Stanley hiked its price target on Tesla (TSLA) to $400 from a prior PT of $250 and called the electric vehicle stock its top pick in the sector. The 52-week high for Tesla (TSLA) is $313.80.
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Source: seekingalpha.com
