Tesla (TSLA) stock continues to surge, with another 2% increase on Wednesday and a total gain of over 10% since the start of the week. While the rise can be partly attributed to factors like the possibility of lower interest rates and incentives for electric vehicles (EVs) in India, Tesla’s non-automotive ventures are also attracting the attention of investors.
Goldman Sachs recently released a note titled “Contextualizing Tesla’s AI and FSD Opportunities,” in which they analyzed Tesla’s addressable market for software products and services. The Goldman team determined that Tesla’s Full Self-Driving (FSD) software, even in its beta testing phase, is already worth an estimated $1 billion to $3 billion in annual revenue. The company currently charges $12,000 upfront or $199 per month for FSD.
Looking ahead, Goldman Sachs projects that the market opportunity for software like FSD could reach $10 billion to $75 billion in annual revenue by 2030, driven by Tesla’s growing fleet of vehicles. This is a remarkable figure considering Tesla’s total revenue for 2022 was $81.5 billion.
Mark Delaney, an analyst at Goldman Sachs, stated, “We believe that Tesla’s software-related revenue could be tens of billions of dollars per year by 2030.” Delaney also highlighted the possibility of additional revenue from licensing Tesla’s Dojo (AI supercomputer) or selling FSD technology to other original equipment manufacturers (OEMs).
Goldman Sachs estimates that by 2030, Tesla’s business, excluding vehicles, could be valued at $115 billion to $225 billion. Within this estimate, the software (mainly FSD) could be worth $10 billion to $75 billion, with services and other offerings totaling $75 billion to $100 billion, and the energy sector reaching $30 billion to $50 billion.
While Goldman Sachs maintains a “Hold” rating on Tesla stock with a price target of $235, their analysis suggests that achieving these projections would require Tesla to generate $800 billion to $1 trillion in revenue by 2040, with mid-high teens EBIT margin.
To fulfill this potential, Tesla would need to capture a significant portion of a global auto market that sells 100 million units per year by 2040, with Tesla sales reaching 15 million units annually. Additionally, the growth of services, energy, software, and robotics would contribute to Tesla’s overall revenue.
However, Delaney acknowledges that there are risks involved, including potential price reductions, increased competition in the EV market, operational challenges, and delays in key product development and software improvements.
In summary, while Tesla’s non-automotive pursuits present promising opportunities, there are still obstacles to overcome. Nevertheless, Goldman Sachs’s bullish outlook on Tesla’s software and services showcases the emerging potential for long-term investors.
FAQ
What is Tesla’s FSD software?
Tesla’s Full Self-Driving (FSD) software is an advanced driver-assistance system designed to enable autonomous driving capabilities. It is currently in beta testing and comes with a hefty price tag.
How much revenue does Tesla generate from FSD?
According to Goldman Sachs, Tesla’s FSD software is already generating an estimated $1 billion to $3 billion in annual revenue. This figure could potentially reach tens of billions of dollars per year by 2030.
What is the market opportunity for Tesla’s software products?
Goldman Sachs projects that the market opportunity for software products like Tesla’s FSD could range from $10 billion to $75 billion in annual revenue by 2030. This growth is expected to be driven by Tesla’s expanding fleet of vehicles and the increasing demand for autonomous driving technology.
What are the risks associated with Tesla’s non-automotive businesses?
Some of the risks identified by Goldman Sachs include potential price reductions, intensified competition in the electric vehicle market, operational challenges, delays in key product development, and issues with software improvements. These factors could impact the growth and profitability of Tesla’s non-automotive ventures.
Sources:
– Yahoo Finance: https://finance.yahoo.com/news/goldman-sachs-analysts-contextualize-teslas-121920415.html