Forget Robotaxis and Humanoid Robots: Morgan Stanley Thinks This Technology Is the Real Secret for Tesla Stock to Soar
While investors fixate on Tesla's (TSLA) robotaxi ambitions and humanoid robots, Morgan Stanley believes the company's next breakthrough could come from an unexpected direction: the emerging drone and electric vertical takeoff and landing (eVTOL) market.
The investment bank sees this 'low altitude economy' as representing a $9 trillion total addressable market by 2050. Tesla's potential entry into this space has gained attention following recent geopolitical events. Moreover, Morgan Stanley noted that drone warfare capabilities have become strategically critical.
CEO Elon Musk himself warned on Tesla's earnings call that countries unable to manufacture their own drones risk becoming 'vassal states' to those that can, highlighting America's current manufacturing deficit compared to China.
What makes Tesla uniquely positioned for this market isn't just ambition, but the company's existing technological infrastructure. Morgan Stanley highlights Tesla's proven expertise in battery storage, navigation systems, autonomous driving technology, robotics, and large-scale manufacturing as transferable skills that are ideally suited for the development of drones and eVTOLs.
The financial implications could be transformative for Tesla shareholders. Morgan Stanley estimates that capturing even a small fraction of the eVTOL market could add between $100 to $1,000 per Tesla share. These estimates indicate potential upside that could easily dwarf the current robotaxi valuations.
Morgan Stanley argues that a single eVTOL could generate revenue equivalent to 15 ride-hailing vehicles, which showcases the superior economics of aerial transportation. Unlike robotaxis, which face regulatory hurdles and require extensive real-world testing, the drone market presents a more immediate opportunity for growth. Tesla's vertical integration advantage positions the company to compete effectively against established aerospace players who lack its innovation speed and cost structure.
Ark Invest Is Bullish on the Robotaxi
A research report from ARK Invest positions Tesla as the clear frontrunner in the emerging robotaxi market. Ark Invest, run by famed growth investor Cathie Wood, cited several critical competitive advantages that could generate massive value for investors.
According to the report, Tesla's competitive edge lies in its unparalleled data collection capabilities. For instance, the EV maker's existing fleet generates over 5 million miles daily through its Full Self-Driving software and has accumulated 87 million total US miles, compared to Waymo's 70,000 daily miles. This vast data advantage provides Tesla with diverse real-world driving scenarios that competitors cannot match.
Fleet scalability represents another crucial differentiator. While Waymo operates roughly 700 vehicles across limited cities, Tesla can leverage 6.5 million existing vehicles globally equipped with compatible hardware.
It can rapidly deploy Model 3 and Model Y vehicles from lease returns and inventory, while customer-owned vehicles can supplement the fleet through opt-in programs. Cost advantages further strengthen Tesla's position. ARK estimates Tesla's Model 3 production cost at $40,000, compared to Waymo's vehicles, which cost over $100,000, with sensor packages alone costing over $40,000. Additionally, Tesla's vertical integration reduces its reliance on external manufacturers, such as China-based Zeekr (ZK), which faces potential tariff headwinds.
The financial opportunity appears enormous. ARK projects that robotaxi platforms could reach $4 trillion in net revenue by 2030, with Tesla potentially commanding take rates exceeding Uber's (UBER) 30% due to a superior cost structure. Higher utilization rates above 50% could significantly undercut traditional ride-hail pricing.
Beyond financial returns, Tesla's autonomous driving technology could prevent over 40,000 U.S. deaths annually. FSD-equipped vehicles have already demonstrated five times better safety than non-FSD Tesla vehicles and 16 times better than average cars.
Is TSLA Stock Undervalued?
While Tesla is part of multiple expanding addressable markets, the company must demonstrate its ability to execute and gain traction in these key verticals.TSLA stock currently trades at 155x forward earnings, which is higher than its three-year average of 114x. Analysts expect Tesla's earnings to increase by 29% annually over the next five years.
Out of the 41 analysts covering TSLA stock, 16 recommend 'Strong Buy,' two recommend 'Moderate Buy,' 13 recommend 'Hold,' and 10 recommend 'Strong Sell.' The average target price for TSLA stock is $292, roughly in line with its current price.
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