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Taking a stance that is notably different from his bearish note earlier this month, when he insisted that Tesla is no longer seen as a growth story, Jonas’ new note struck a more optimistic tone. “We believe investors underappreciate/undervalue Tesla’s Autonomy business. Many investors to whom we speak do not explicitly include Tesla’s Autonomy business in their valuation of the company,” he stated.
The analyst also listed down other critical areas of Tesla’s business that are “underappreciated” by investors. Among these are Tesla’s vast infrastructure of charging stations, the company’s solar and energy storage products, a potential business of selling EV batteries to other carmakers, and the opportunities presented by the Tesla Semi. Jonas noted that each of these areas has “potential commercial value beyond the manufacturing of Tesla vehicles.”
While Jonas’ change of heart presents an easy target for criticism, it is difficult to argue against the Morgan Stanley analyst’s points about the potential of Tesla’s autonomous driving solutions. Other full self-driving firms such as Waymo and GM Cruise, after all, enjoy healthy valuations from the financial sector. GM Cruise, for example, lags behind Tesla and Waymo in real-world miles, but the unit is nonetheless valued at $19 billion as of May 2019, following a $1.15 billion funding round from investors such a SoftBank and Honda. Jonas, for his part, estimates Tesla’s self-driving technology to be worth around $8.5 billion.
Among the companies that are currently pursuing full self-driving technology, Tesla is arguably the one with the most real-world data. During his presentation at Tesla’s Autonomy Day, Director of AI Andrej Karpathy pointed out that when it comes to training artificial intelligence for autonomous driving, there is simply no substitute for miles that are driven in the real world. This is something that companies such as Waymo and GM Cruise inherently lack, due to their limited number of vehicles on the road.
With the rollout of its custom Hardware 3 computer, Tesla is currently making a serious play for full self-driving. CEO Elon Musk has even noted that Tesla’s Full Self-Driving suite should become “feature complete” by the end of 2019. Musk has also suggested that the Tesla Network’s autonomous Robotaxi service could be ready by next year, pending regulators’ approval. If Tesla can meet these aggressive timetables, then investors in the company would likely find it very difficult to not account for the value of the electric car maker’s full self-driving technology.
As of writing, Tesla stock is trading +1.09% at $215.19 per share.
Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.