Morgan Stanley Analyst Provides Insight Into Tesla's Future

In a research note released Tuesday, Morgan Stanley's Adam Jones provided insight into what the future may hold for Tesla Motors TSLA. In his note, Jones maintained Tesla's Overweight rating and $320 price target but stated, "If Tesla can achieve battery cost per kWH below $150 and defend the intellectual property, there is significant potential for revenue streams not captured in our $320 price target."

Recently, Tesla released information about its much anticipated, 5 billion dollar gigafactory. In response to this, Jones noted three main points that could affect the company's future share price.

1. Tesla's 2020 vehicle production target of 500k is 35% higher than our 371k unit forecast.
2. Tesla's projected 50 GWh of annual battery production (pack level) from its Gigafactory by 2020 is more than double our forecasts.
3. Tesla's target for >30% reduction in cost per KWh appears vs. a base of around $200/KWh planned by first Gen 3 production in 2017, implying costs <$150/KWh once ramped up.

Jones believes the market is "still in the early stages of reassessing Tesla's potential addressable market". Jones also noted that the success of Tesla's gigafactory could lead to the development of "an entirely new industry," which could possibly break into a $1.5 trillion global electricity market.