REUTERS/Stringer
- Tesla's FSD software could bring major gains to the company's revenue, Gene Munster said.
- If Tesla licenses out the technology and lowers the price, that could add up to $20 billion a year.
- Shares slid 8% on Thursday as investors digested the firm's lower profit margins for the second quarter.
Tesla's "Full Self-Driving" feature is a big deal for the company's stock, and the technology has the potential to boost revenue by up to $20 billion a year, according to Gene Munster.
The Deepwater Asset Management managing partner pointed to Elon Musk's announcement on Tesla's second-quarter earnings call, when he confirmed the company was in talks with a major manufacturer to license its Full Self-Driving software.
Sharing Tesla's FSD technology could be a major boost, since competitors are likely to use a first-to-market technology instead of spending money to develop their own version.
"The financial potential of licensing FSD is significant," Munster said in a note on Wednesday.
Though Tesla currently charges customers $199 a month to upgrade from Basic Autopilot to FSB, reducing the price to just $100 a month and licensing out the software to 25% of new cars and light trucks on the market has the potential to boost the firm's revenue by around $4 billion, Munster estimated.
By the fifth year, that could likely expand to an additional $20 billion in annual revenue, he added. In 10 years, Tesla could be pulling in $100 billion in operating income, he estimated, meaning FSD licensing would add an additional 20% to operating profits.
"While these targets are many years away, it illustrates the FSD licensing opportunity is meaningful and worth the wait,"Munster said.
Meanwhile, Tesla stock slid 8% on Thursday as investors digested the company's financials for the second quarter, which saw lower profit margins due to aggressive price cuts in the last year on its key car models.
But margins are likely to move higher over the next few years, Munster said, predicting a 20% gross margin by the end of 2024.