Tesla shares are up nearly 6% in the pre-market session after Morgan Stanley’s Adam Jonas raised his price target on the name to $400, upgraded the company to “overweight” and named Tesla a top pick.
Jonas predicts that Tesla’s Dojo supercomputer may add as much as $500 billion to the company’s market value as a result of faster adoption of Robotaxis and the company’s network services. Jonas says the technology can open up “new addressable markets” in the same way AWS did for Amazon.
Dojo could put Tesla at “an asymmetric advantage” in a market potentially worth $10 trillion, the note says.
In its 66 page note out Monday morning, MS wrote: “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 (SaaS). The change drives our PT increase to $400 vs. $250 previously. We upgrade to Overweight and make Tesla our Top Pick.”
“Investors have long debated whether Tesla is an auto company or a tech company. We believe it’s both, but see the biggest value driver from here being software and services  revenue,” Jonas says opening his note.
“The same forces that have driven AWS to reach 70% of AMZN total EBIT can work  at Tesla, in our view, opening up new addressable markets that extend well beyond selling  vehicles at a fixed price. The catalyst? Dojo, Tesla’s custom supercomputing effort in the works for the past 5 years.”
Jonas adds: “We believe Dojo can represent the next step-change in market  perception of Tesla. Dojo emphasizes 3 of Tesla’s core capabilities: 1) speed, 2) performance, and 3) cost. In the near term, we believe  Dojo can accelerate the development and monetization of Tesla’s  software and services business. Longer term, we see scope for Dojo  to provide avenues for Tesla’s software and hardware capabilities to  extend well beyond the auto industry. 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.”
