Tesla has a $40 Trillion Opportunity
Tesla has a $40 trillion opportunity, which Steven Mark Ryan of Solving the Money Problem on YouTube has gone over. Let's dive into what this is.
What is this $40 trillion opportunity for Tesla? It comes from a Morgan Stanley research note, the MOACC: 5 Thoughts on the Mother of All Capex Cycles. The gist of this research paper is in how the next 12 months will show investors how Tesla and the broader auto industry are vital to the transition off of the fossil fuel economy.
Assuming the broader auto industry does move to EVs, which is a big IF, they could play a critical role in re-architecting the renewable energy/transport industry. Morgan Stanley estimates as much as $20 to $40 trillion must be spent over the next 20 years in accumulated capex and R&D to transition off of fossil fuels.
This is quite a lot of money and the thing that I worry about with legacy auto companies is that they have a large business around the ICE (internal combustion engine) vehicle. With this huge commitment, legacy auto are trying to serve two masters: ICE and EV. They can only serve one and if it's not EV, then they will become bankrupt.
Morgan Stanley's View on Tesla
Morgan Stanley views Tesla as overvalued and undervalued at the same time. In their opinion, Tesla is overvalued as a pure car company (solving for just a unit, x, as a price of cars), but the company may be significantly undervalued when you take into account a renewable energy on-shore infrastructure company. They see Tesla as the ultimate battery capex play.
Because of two major events, war and inflation, energy innovation is going to get rewarded, according to Morgan Stanley. They see events over the next 6 months that can materially shift the narrative around what Tesla does, the markets they address, their growth profile, and the global/strategic implications of the ecosystem on which they sit atop.
Morgan Stanley thinks investors are starting to appreciate the advantages Tesla has in going direct to consumer while legacy auto makers are prohibited from doing so by powerful state dealer franchise laws. I agree with this, Tesla can sell cars however they want. Legacy auto makers use outdated dealerships with sales tactics and additional partnerships and red tape that causes problems.
Morgan Stanley also sees bigger forces driving the multi-deca-trillion-$ battery capex cycle. As globalization evolves into a new era featuring heightened concerns around national security, investors much contemplate the new energy supply and supporting infrastructure. Battery storage is going to be a big key in the future, and Tesla is poised to be the leader.
Tesla will be able to make tons of batteries, more than anyone else as Elon Musk has stated that Tesla will likely begin their own mining - either by acquiring mining companies, or making their own mining operations from within.
It's good that Morgan Stanley is thinking beyond just the car business for Tesla. However, their price targets and earnings per share estimates are puzzling and way below what I see them going to over the next few years.
Do you agree with Morgan Stanley's research? What will Tesla be worth by the end of 2025?
Leave your comments below, share the article with friends and tweet it out to your followers.
Jeremy Johnson is a Tesla investor and supporter. He first invested in Tesla in 2017 after years of following Elon Musk and admiring his work ethic and intelligence. Since then, he's become a Tesla bull, covering anything about Tesla he can find, while also dabbling in other electric vehicle companies. Jeremy covers Tesla developments at Torque News. You can follow him on Twitter or LinkedIn to stay in touch and follow his Tesla news coverage on Torque News.