What happened

Shares of Tesla (TSLA 2.99%) are rising sharply again, following an 8% gain on Tuesday. The electric-car maker's stock is up following Morgan Stanley analyst Adam Jonas' decision to increase his price target on the stock by $180.

As of 12:10 p.m. EST, the growth stock had climbed as much as 9%.

Model 3 interior

Model 3. Image source: Tesla.

So what

Jonas now has a 12-month price target of $540 on Tesla shares, up from a previous target of $360. The analyst's increased bullishness on the stock comes as he adds software and connected vehicle services revenue to his forecasts for the company. The present value of future earnings derived from software and connected vehicle services alone is worth $160 per share, Jonas argues.

The analyst changed his rating on the stock from equal weight to overweight -- the equivalent of a buy rating.

Shares may also be benefiting today from further optimism from the market following yesterday's news that the stock will soon be included in the S&P 500 index.

Now what

Tesla is certainly bullish on the sales potential of its software. The automaker believes it will eventually be able to release an over-the-air software update to its vehicles that will make them fully self-driving. Indeed, Tesla has already released a self-driving beta to some of its vehicles. This beta software, however, required drivers to be ready to take over the wheel at a moment's notice.

Tesla plans to increase the price of its "self-driving" Autopilot option as it improves and as more features are released. There's even speculation that the company is considering transitioning to a subscription model for the software.