It happened in 2015, and it’s happening again this week. The problem is investors fear we’re seeing a replay — because after eight years Jonas’ last call has yet to be proven correct.
Jonas raised his price target on the electric-vehicle maker by a hefty 60% over the weekend, saying the company’s Dojo supercomputer can add as much as half a trillion dollars to its valuation through faster adoption of so-called robo-taxis and network services. Jonas’ call pushed Tesla shares up 10% Monday, their best performance since January, pushing the stock price over $270 and adding nearly $80 billion to its market capitalization.
“Could Dojo or the full-self-driving technology it empowers be worth $500 billion? Sure, but the key there is ‘if’ it is actually successful,” Jerry Braakman, chief investment officer at First American Trust, said in an interview. “We think that is a big ‘if,’ as replicating the human brain is really complicated.” First American holds about $4.4 million of Tesla stock, according to Braakman.
In 2015, Jonas raised his target on Tesla by 66% based on the company’s potential to develop a “shared mobility” business. At that time he predicted that Tesla would roll-out fully self-driving taxis by around 2025. That hasn’t panned out, leading the analyst to significantly pare down his expectations for the robo-taxi operation over the years.
Meanwhile, Tesla is still working on developing a software that will make its cars truly self-driving, though experts and analysts see a broad adoption of fully autonomous cars as still years, if not decades, away. Jonas had lowered his estimate for Tesla Mobility, the carmaker’s ride sharing/robo-taxi business, by about 82% by mid-2019.
A Morgan Stanley spokeswoman said Jonas was unavailable to comment for this story.
Tesla itself has high hopes from its Dojo supercomputer as well, and Elon Musk in July said the company was sparing no expense to become a player in supercomputing and planned to invest more than $1 billion on Dojo by the end of 2024.
‘Outlandish’ Projection
Regardless of the computer’s potential, some investors find the $500 billion projection from Morgan Stanley “outlandish,” especially given Tesla’s already high valuation.
“There is clearly a significant opportunity around autonomy, but it is years away and it is still unclear who is best positioned to benefit,” said Ivana Delevska, chief investment officer at Spear Invest. “We don’t see this as a winner-takes-all market.”
Delevska and Braakman aren’t alone. Owuraka Koney of Jennison Associates, another long-term believer in Tesla, said in an interview in July that fully self-driving automobiles remain years away, and until then the car business is key to the company’s growth.
That said, Jonas has company, too. RBC Capital Markets analyst Tom Narayan, who has a $305 target and a buy-equivalent rating on the stock, sees most of that value — about $210 per share — coming from the robo-taxi business.
Then there’s Cathie Wood of Ark Investment Management LLC, who earlier this year said Tesla’s plans for self-driving cars were much more important than its EV strategy. Ark’s 2027 price estimate is $2,000, with the prospective robo-taxi business contributing over two-thirds.
To investors, the question is how soon will all this happen? An analysis by Bloomberg New Energy Finance estimates a global robo-taxi fleet will first surpass 1% of annual kilometers traveled by passenger vehicles in 2039.
But for Jonas’ prediction to come true, Tesla shares will need to rise over 60% from Friday’s close in just the next 12 months. The stock is already up 121% this year, and technical indicators show that it’s approaching overbought levels.
“It is important to note that Tesla’s current market cap already assumes significant value for autonomy,” Spear’s Delevska said. “There are no other automakers trading at about $800 billion.”