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Tesla (NASDAQ:TSLA) started production of Dojo in July and plans to spend more than $1 billion through next year.
Dojo can open up new addressable markets that “extend well beyond selling vehicles at a fixed price,” Morgan Stanley analysts, led by Adam Jonas, said in a note published on Sunday.
“If Dojo can help make cars ‘see’ and ‘react,’ what other markets could open up? Think of any device at the edge with a camera that makes real-time decisions based on its visual field,” Jonas said.
The Wall Street brokerage upgraded its recommendation on Tesla’s stock to “overweight” from “equal-weight” and made it their “top pick,” replacing Ferrari (NYSE:RACE)’s U.S.-listed shares.
Tesla shares were up nearly 5% at $260.35 in premarket trading.
Morgan Stanley raised its 12-18 month target on Tesla’s shares by 60% to $400 – the highest among Wall Street brokerages as per LSEG data – which, it estimated, would give the EV maker a market capitalisation of about $1.39 trillion.
That compares with its current market value of about $789 billion, after the stock closed at $248.5 on Friday.
Jonas expects Dojo to drive the most value in software and services.
The analyst raised his estimate for revenue from Tesla’s network services business to $335 billion in 2040, from previous forecast of $157 billion.
Jonas expects the unit to account for more than 60% of Tesla’s core earnings by 2040, nearly doubling from 2030.
“This increase is largely driven by the emerging opportunity we see in third-party fleet licensing, increased ARPU (average monthly revenue per user).”
