Morgan Stanley Eyes $840 Tesla Target on Semi Software

Morgan Stanley recently hiked its bull case price target for Tesla to $840. This shift is not based on consumer cars but on the potential for the Tesla Semi to generate significant software revenue through autonomous trucking. While the firm kept its base case price target at $400, the updated bull case highlights a new way to value the company.

Analyst Andrew Percoco suggests that Tesla could charge between 85 cents and $1 per mile for autonomous driving software on its commercial trucks. With a Semi covering roughly 18,000 miles every month, the math implies a high margin revenue stream that dwarfs the cost of a standard consumer subscription. Rising diesel costs could also motivate large fleets to switch to electric, self driving vehicles sooner than expected.

Percoco projects about 82,000 electric trucks on the road by 2040. If achieved, this segment alone could pull in $17 billion in annual software revenue. However, risks remain. Elon Musk has stated that Tesla is prioritizing self driving features for high volume vehicles like the Model 3 and Model Y, meaning the Semi might have to wait for its turn in the autonomy queue.

Investors should monitor how quickly Tesla can move from projections to actual autonomous highway operation. As more data on the Semi program becomes available, other analysts will likely adjust their own outlooks, which will continue to influence how the market values the stock.