Why A Tesla-SpaceX Partnership Makes Sense, According To Morgan Stanley

Tesla Inc TSLA needs wireless connectivity. SpaceX has plans to launch satellites.

To one Street analyst, the math is simple.

The Rating

Morgan Stanley analysts Adam Jonas and Armintas Sinkevicius maintained an Equal-weight rating on Tesla with a $376 price target.

The Thesis

SpaceX is expected to enter the broadband satellite market in 2019, and it may become of use to Internet-of-Things businesses reliant on cyber-secure networks.

“As cars become ever more connected, we believe that Tesla and SpaceX may offer mutually beneficial services to one another,” Jonas and Sinkevicius wrote.

Tesla’s autonomous cars will operate through the transmission of large amounts of data.

They’ve proven thus far to produce up to 40 terabytes — more than what the average Apple Inc. AAPL iPhone would produce in wireless data over 1,000 years — while on the consumption side, they're expected to accrue several trillion hours of cloud-connected drive time. Non-essential entertainment functions will also need network support.

“How will Tesla manage such a large quantity of data?” the analysts wrote. “In our opinion, leveraging the broadband network provided by its very own sister company seems like a plausible answer.”

Price Action

At time of publication, Tesla was trading up marginally off the open at $285.79.

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