Morgan Stanley analyst Adam Jonas upgraded Tesla (TSLA) to Overweight from Equal Weight with a price target of $540, up from $360.
The stock closed Tuesday up $33.52, or 8%, to $441.61.
Tesla is "on the verge of a profound model shift" from selling cars to generating high margin, recurring software, and services revenue, Jonas tells investors in a research note. The analyst views the car business as the "entry ticket" for Tesla to "unlocking much larger" total addressable markets. For the first time, Jonas added software/connected vehicle services revenue to his earnings forecast and base case valuation. With the company's global car population set to rise from 1.3M units in 2020 to 2.1M next year, a more in-depth understanding of the revenue streams derived from each car is warranted right now, says the analyst.
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