A Morgan Stanley note Tuesday pegged the value of General Motor's nascent electric vehicle business at $20 billion, a tally well above the firm's assessment of GM's core gasoline-powered lines.
Why it matters: It signals analysts' view that revenues from electric vehicles and battery tech are going to be a big thing despite what's now a tiny market share, but it's unclear who the long-term winners will be.
- Tesla now has a market capitalization of $362 billion (!) after its stock closed at an all-time high of $1,887-per-share Tuesday.
- Just yesterday the fledgling player Canoo, which is planning an untested subscription service and hasn't built anything yet, announced a $2.4 billion deal to go public.
- Several electric vehicle startups are raising lots of money, including the private Rivian, which raked in another $2.5 billion earlier this year, while the electric truck company Nikola Motor has seen its share price climb since it began publicly trading in June.
The intrigue: The note from Morgan Stanley's Adam Jonas comes amid buzz about the idea that GM might spin off its electric vehicle business into a stand-alone unit (an idea that Axios' Joann Muller explored recently).
- GM is betting big on electric vehicles, with plans to have 20 fully electric models by 2023.
Driving the news: GM's stock jumped earlier this week on the strength of a Deutsche Bank report Monday that suggested the value of a stand-alone electric vehicle unit could even be way above what Morgan Stanley estimates.
- The Morgan Stanley note also concludes a spinoff is a good idea. "[T]he autonomy between the two units can liberate each other of various impediments to efficient capital allocation and talent development," Jonas writes.
What they're saying: A CNBC headline on the topic sums it up: "Wall Street pushes for GM to spin off its electric vehicle business."
The big picture: Morgan Stanley analysts assess the stock's value at $46-per-share, well above where it's currently trading, and their "bull case" is far higher.
- Their note — which acknowledges lots of uncertainty — is an attempt to size up the long-term potential of GM's electric vehicle technologies, notably the company's new "Ultium" battery and propulsion system, which it is using internally and as a product to sell to other automakers.
- They see opportunities and pitfalls — and a substantial revenue opportunity. With lots of caveats, the note sees $22 billion in annual revenue by 2030 and $74 billion in 2040.