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• The firm preliminarily estimates that Tesla Solar, at full capacity, could add $20 billion to $50 billion, or $6-$14 per share, of equity value to Tesla Energy business. 
• While this is "not too material to Tesla's valuation on a standalone basis," the firm believes allocating capital to adding solar capacity may be justified by the value creation and growth opportunities it presents. 
• The firm has an ‘Equal Weight’ rating and $415 price target on Tesla shares.

Shares of Tesla Inc. (TSLA) edged up 2% on Tuesday after Morgan Stanley reiterated optimism in the EV maker’s solar business.

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Morgan Stanley believes Tesla's decision to allocate capital to solar manufacturing is rooted in a strategic long-term outlook around geopolitics and data center demand.

“Said differently, in the absence of this investment, Tesla could run the risk of facing significant energy-related bottlenecks that handcuff its ability to achieve its broader goals across other businesses,” the firm said.

The firm preliminarily estimates that Tesla Solar, at full capacity, could add $20 billion to $50 billion, or $6-$14 per share, of equity value to Tesla Energy business that the firm currently values at $140 billion, or $40 per share.

While this is "not too material to Tesla's valuation on a standalone basis," the firm believes allocating capital to adding solar capacity may be justified by the value creation and growth opportunities that having a vertically integrated solar and energy storage business can yield, the analyst said. The firm has an ‘Equal Weight’ rating and $415 price target on Tesla shares.

Tesla Solar Plans

In January, at the World Economic Forum (WEF) in Davos, Tesla CEO Elon Musk said the company is targeting 100 gigawatts of annual solar manufacturing within three years. Musk reiterated the target in a call with analysts following Tesla’s fourth-quarter (Q4) results.

“We're building more manufacturing capacity and expect that energy will have very high growth for really as far into the future as we can imagine. The solar opportunity is underestimated,” Musk said. “So that’s why we’re gonna work towards getting 100 gigawatts a year of solar cell production, integrating across the entire supply chain, from raw materials all the way to finished solar panels,” he added.

How Did Stocktwits Users React?

On Stocktwits, retail sentiment around TSLA stock rose from ‘bearish’ to ‘neutral’ territory over the past 24 hours, while message volume stayed at ‘normal’ levels.

TSLA stock has gained 21% over the past 12 months. 

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