Have you heard of the tunnel economy yet? Morgan Stanley’s Adam Jonas thinks you should. The analyst has been researching this area’s potential to innovate at the intersection of transportation and infrastructure.
And if you are looking to stake a bet on this theme, the stock to own, according to Jonas, would be… Tesla (TSLA).
“Our work on the tunnel economy has deepened our appreciation for Tesla’s potential role in the build-out of renewable transport infrastructure across a range of modalities,” the 5-star analyst said. “As the world’s most valuable auto company and a key promoter of autonomous technology, we believe Tesla will have an enabling role to play in the development of The Boring Company,” which is majority owned by Elon Musk.
Jonas views the company as potentially the “main disrupter in the tunnel industry” to drive the path to a ~$20 billion US Tunnel TAM by 2050. There are also “potential synergies” here with the other elements of the ‘Muskonomy,’ – Tesla, SpaceX, and Neuralink.
The Boring Company has set its sights on developing a subterranean infrastructure at 10 times the speed of conventional TBMs (tunnel boring machines) at 1/100th the cost. I.e., instead of spending $1 billion per mile over 10 years, the company plans to do so at $10 million per mile in under 1 year, and all privately funded, to boot.
Can that actually be done? Certain TBM experts say no. “We’ve heard similar critiques from A&D and auto industry experts about SpaceX and Tesla over the years,” Jonas noted.
The analyst sees the investment trajectory playing out in a similar fashion to that of autonomous cars, eVTOL and space. Little investor interest to begin with, but as boring becomes prevalent in more cities and more miles of tunnels open up for commercial use, the analyst expects the investment community to prick up their ears – this is around 2023 and 2024. Then the ‘red dot’ moment will hit, when the “broader investment community may appreciate the theme and its relevance on existing and new publicly traded companies.”
Unsurprisingly, Jonas is a Tesla bull, rating the stock an Overweight (i.e. Buy) along with a $1,300 price target. Should the figure be met, investors are looking at one-year upside of ~44%. (To watch Jonas’ track record, click here)
Overall, among the analyst community, the majority are on Tesla’s side. Factoring in 17 Buys, 7 Holds and 6 Sells, the EV giant has a Moderate Buy consensus rating. The forecast calls for one-year gains of ~22%, given the average price target clocks in at $1,105 and change. (See Tesla stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
