This level-headed Tesla bull still expects 5 million Cybercabs by 2040

Tesla's ( TSLA ) surprise $5 billion haircut to its capital expenditure plans in its latest earnings call hasn't shaken investor confidence in the long-term potential of a large Cybercab network.

Maybe some near-term confidence was lost in the Optimus humanoid as Tesla deals with design challenges, but not in Cybercabs.

Case in point: Even the reasonable modeling assumptions on the Cybercab from Morgan Stanley analyst Andrew Percoco, who has an Equal Weight rating on the stock, still have the fleet size hitting 5 million by the end of 2040. That will be fueled by sharp growth over the next three years, as the chart below indicates.

"Importantly, Tesla is pursuing both geographic expansion and increasing fleet density within existing markets, with plans to expand operating hours toward 24/7 service, higher-speed roads, highways, and more weather conditions by year-end," Percoco said. "In response to our question, management acknowledged that software capabilities remain a constraint on scaling today, although regulatory approvals could become the primary bottleneck over time."

He added, "We continue to view sustained growth in unsupervised miles, fleet density, and safety performance as the most important indicators of progress toward commercial scale. We come away from the quarter more confident in our fleet size estimates through 2027 given the pace of progress demonstrated thus far."

Musk said on Tesla's late Wednesday earnings call that the company's Cybercab fleet in Austin, Texas, has grown by a factor of 10 since its launch roughly a month ago. The company has more than 300 Cybercabs operating in Austin.

Tesla said it has reached nearly 2 million cumulative unsupervised miles for its Cybercab service as of the end of the third quarter. Operating hours in Austin are now 6 a.m. to midnight.

The company plans to expand its Cybercab service to Dallas in November.

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