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No. of Recommendations: 5
What type of company is Tesla exactly? And how should the stock be valued? Wall Street’s answers, however, are wildly different -- Morgan Stanley has a price target of $780, while JPMorgan Chase’s is $90.

Adam Jonas, Morgan Stanley:

Tesla is moving people away from valuing and analyzing the company by just using the number of units sold and the price of the car, and bringing into account the installed user base and the software and content services offered to those users. In the process, it takes you away from comparing Tesla to car companies and should rather be compared to software-as-a-service companies.
Out of our $540 price target, $254 is attributed to the core auto manufacturing business, $154 to the network-services business opportunity, $58 to the potential of becoming a supplier of batteries and powertrain to third parties, $38 to the mobility and ride-sharing business opportunity and $25 to the insurance and energy business.

Ryan Brinkman, J.P. Morgan:

At the end of the day, investments are worth the discounted value of their future cash flow. When we tried to reverse engineer Tesla’s current market value to go see what assumptions might be embedded in it, we found it requires revenue and margin that are really difficult to envision.

In terms of what this company may look like in the future, I see it primarily as an automaker, although one which derives a minority of its revenue from additional potentially faster growing end-markets. From an automotive end-market perspective, it may possibly approximate in the coming decade the size and profitability of a Daimler or BMW. That doesn’t mean it should trade at Daimler or BMW multiples right now, of course, given its faster growth and additional end-market optionality.

I don’t think I have ever seen two mainstream Wall St. analysts diverge so extremely on their valuation of a company. Echoes the two sides of the debate we have had on this board.
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