Morgan Stanley hails Tesla’s mobility service upside

(Seeking Alpha) – Morgan Stanley is positive on Tesla’s (NASDAQ:TSLA) mobility/transport as a service model, also known as TaaS.

“We believe that the company is in a better position to deploy its ride-hail/transportation as a service business faster and more profitably than our previous forecast. Reductions in the price of the car and battery, improvements in the EV charging infrastructure, insurance costs, residual value retention and other factors have also increased the economic inputs of our Mobility model for Tesla,” writes analyst Adam Jonas.

Mobility math from Jonas: “We forecast a launch of 1,000 cars (from the existing fleet) in Tesla Mobility by 2021, rising to 500k cars by 2030, which would account for 2.7% of our Tesla global fleet estimate (18.6mm units) by that year.

Our previous assumption for the Tesla Mobility fleet was 240k units by 2030. We assume $45,000 per cost car (vs. $60k previously) and a 7-year useful life, and other savings, driving our exit OP margin of Tesla mobility to 14.7% (10.4% previously). We use a 10% WACC (11% previously) and a 4% terminal growth rate (2% previously) implying an exit PE multiple of 17.3x (11.3x previously). Taken together, our valuation of Tesla Mobility rises to $42bn ($41/share) vs. $7.3bn ($7/share) previously.”

Morgan Stanley keeps an Equal-weight rating on Tesla and as is its way – posts separate price targets to rep three scenarios.