Tesla’s FSD alone could be worth a lot more than the EV Giant’s current market cap in a decade: analyst

Tesla, Inc. (NASDAQ: TSLA) recently launched the subscription option for fully self-driving.

Loup Ventures Managing Partner Gene Munster shared his thoughts on what this means for the company.

FSD can move the financial needle: The subscription option could accelerate FSD adoption given the cost shifts from $10,000 upfront to $200 per month, or $99 for cars that already have advanced Autopilot, Munster said in the note.

According to the analyst, this is an important step on the long-term path to increasing margins, which will strengthen the company’s business model.

“Improving profitability is key for mainstream tech investors to endorse Tesla as a true technology company,” Munster wrote in the note.

The analyst expects FSD retention to increase as Tesla adds capabilities, although he sees more cancellations initially.

“The good news for Tesla is that between now and 2031, an FSD subscription could move the financial needle for the company,” Munster said.

Related link: Why Goldman Sachs is bullish on Tesla ahead of Q2 earnings

FSD will live up to its name over time: FSD is currently far from fully self-driving and does not live up to its name, according to the analyst. Over time, the analyst expects it to deliver level 4 or 5 autonomy.

FSD currently works on highways and parking lots, given it important functions such as autopilot navigation, automatic lane change, automatic parking, calling and controlling traffic lights and stop signs, the analyst said.

Tesla chose to use the FSD name because the product will eventually be fully autonomous as new features are added, including automatic steering on city streets, later this year, he added.

The Impact of FSD on Earnings and Valuation: FSD’s pre-recorded operating profit and subscriptions will increase from $600 million in 2021 to $102 billion in 2032, Munster said. This, according to the analyst, is based on the assumption that about 80% of Teslas on the road will have FSD by 2031. Operating margin is expected to increase from 42% in 2021 to 64% in a decade, he added.

FSD alone will be worth $850 billion to Tesla within a decade, compared to the company’s current market cap of $620 billion, Munster said.

Tesla shares closed Friday’s session at $643.38, down 0.91%.

Related link: Demand for Tesla Model Y boosts battery sales from LG Energy Solutions, Korean company becomes top seller in May

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