Morgan Stanley has reiterated its positive outlook on Tesla's solar manufacturing expansion, estimating it could add up to $50 billion in value to the company's energy business. The firm highlights strategic benefits amid geopolitics and data center demand. Tesla shares rose 2% following the note.
Shares of Tesla Inc. (TSLA) increased by 2% on Tuesday after Morgan Stanley analysts reiterated their optimism regarding the electric vehicle maker's plans to expand solar manufacturing capacity.
The investment bank views Tesla's allocation of capital to solar production as a strategic move driven by long-term considerations around geopolitics and growing data center energy needs. "Said differently, in the absence of this investment, Tesla could run the risk of facing significant energy-related bottlenecks that handcuff its ability to achieve its broader goals across other businesses," the firm stated in its note.
Morgan Stanley preliminarily estimates that Tesla Solar, operating at full capacity, could contribute $20 billion to $50 billion in equity value to the Tesla Energy business, equivalent to $6 to $14 per share. This addition would build on the firm's current valuation of Tesla Energy at $140 billion, or $40 per share. Although the analysts describe this as "not too material to Tesla's valuation on a standalone basis," they argue it justifies the investment due to potential value creation from a vertically integrated solar and energy storage operation.
The firm maintains an 'Equal Weight' rating on TSLA shares with a $415 price target.
Tesla CEO Elon Musk outlined ambitious solar goals in January at the World Economic Forum in Davos, targeting 100 gigawatts of annual solar manufacturing within three years. He reiterated this during a call with analysts after the company's fourth-quarter results. "We're building more manufacturing capacity and expect that energy will have very high growth for really as far into the future as we can imagine. The solar opportunity is underestimated," Musk said. "So that’s why we’re gonna work towards getting 100 gigawatts a year of solar cell production, integrating across the entire supply chain, from raw materials all the way to finished solar panels."
A separate report notes Musk's vision includes deploying solar-powered data centers in space, potentially boosting the value from the 100 GW plan by up to $50 billion.
On Stocktwits, retail sentiment for TSLA shifted from 'bearish' to 'neutral' over the past 24 hours, with message volume at 'normal' levels. The stock has risen 21% over the past 12 months.
