Tesla (TSLA) stock has been on fire lately, up 2% on Wednesday and more than 10% since the beginning of the week. While factors such as the possibility of interest rates falling or lowering and reports of incentives for EVs in India boosted bullish sentiment this week, a Wall Street bank revealed that Tesla’s non-automotive activities are also of interest to investors. Might be of interest, especially long term.
In a note titled “Contextualizing Tesla’s AI and FSD Opportunities,” Goldman’s Mark Delaney and his team updated their outlook on the addressable market for software products and services such as hardware, AI, and data and the best ways to drive business growth. Tried to model from.
Worth noting is the team’s determination that Tesla’s FSD (Full Self-Driving) software, although still in beta testing, is already worth $1 billion to $3 billion in terms of annual revenue. . Tesla charges $12,000 upfront for its FSD software, or $199 per month on a subscription basis.
Tesla FSD beta in use (Tesla YouTube video) (Tesla YouTube page)
In terms of upside, Delaney wrote that the market opportunity for software like FSD could be $10 billion to $75 billion per year in revenue by 2030, stemming from Tesla’s growing fleet of vehicles. This is an astonishing amount, considering that Tesla’s total revenue for 2022 was $81.5 billion.
“We believe Tesla’s software-related revenues could reach tens of billions of dollars per year (mostly from FSD) by 2030,” Delaney wrote. “These scenarios show that in the upside case FSD could contribute tens of billions of revenues per year (and even more if we consider licensing to Dojo or selling FSD to other OEMs).”
Delaney prepared low, mid, and high 2030 revenue and EPS projections for Tesla’s various businesses. Excluding vehicles, Delaney’s model suggests those businesses could be valued at $115 billion to $225 billion by 2030, software (of which most will be FSD) valued at $10 billion to $75 billion above, and services and Can happen with others (like Optimus Humanoid). and Supercharger network) coming in at $75 billion to $100 billion, and energy coming in at $30 billion to $50 billion.
The Goldman teams’ full-year EPS estimates for the low, middle, and high scenarios are $9.84, $18.08, and $31.91, respectively. Note that Tesla’s full-year EPS for 2022 was $4.03.
That being said, Delaney and team reiterated the stock at Hold with only a $235 price target, as meeting those metrics would take $800 billion to $1 billion in a “steady state” with mid-to-high teens EBIT margins by 2040. Trillions of revenue will be required.
With a global auto market of 100 million units per year by 2040, Tesla selling 15 million units per year would help reach that valuation, with room for upside, Delaney predicted.
“it [auto sales] Revenue of approximately $525-600 billion can be achieved. We believe the services could exceed $150 billion as Tesla grows its installed base (and opens up its charging network and insurance). We believe energy, software, and robotics will create the balance (or provide the upside),” Delaney wrote.
The main downside risks to Delaney’s forecast relate to steep price cuts, increased competition in EVs, operational risks, delays in key products such as batteries and of course the possibility of delays or problems developing software such as FSD.
Currently FSD is stuck in beta testing as the software still has room to work, and of course the software’s capabilities are being scrutinized by safety regulators NHTSA and the Department of Justice, as well as Tesla publicizing them to the public. being done.
It’s still a high hurdle to overcome, and not without risk, but Goldman’s bull case for Tesla’s non-automotive businesses is starting to materialize, at least from an investment perspective.
Prasad Subramaniam is a reporter for Yahoo Finance. you can follow him Twitter and on Instagram,
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