Shares of Tesla (TSLA -12.34%) rose sharply again on Wednesday, following a run-up on Tuesday fueled by news of the electric-car maker stock's planned inclusion in the S&P 500 index. Driving the stock price higher this time was a huge price target hike by Morgan Stanley analyst Adam Jonas.

The growth stock could benefit in the coming years from a business model shift toward higher-margin software and vehicle services revenue, the analyst says.

Here's a closer look at why Jonas is so bullish on Tesla stock.

Model S interior.

Model S. Image source: The Motley Fool.

Software revenue could propel Tesla stock higher

Tesla has become more than an automaker, Jonas told investors are Wednesday. The company is "on the verge" of a significant shift in its business model, the analyst explained. This enhanced business model will include meaningful revenue contribution from a high-margin software business on a recurring basis. Jonas is so confident in Tesla's future earnings potential from software that he has added software and connected vehicle services revenue and earnings to his forecasts for the business.

The addition of this expected business growth accounts for almost all of his $180 increase in his 12-month price target. Jonas now expects Tesla shares to rise to $540 over the next 12 months. This is up from a previous price target of $360.

With Jonas' new price target representing meaningful upside over the stock's $479 price tag at the time of this writing, he unsurprisingly boosted his rating for the stock from equal weight to overweight (similar to a buy rating).

Tesla's self-driving software is already becoming more valuable

Tesla already generates significant sales from Autopilot software. The company currently charges $10,000 per vehicle for its "Full Self-Driving" upgrade to its standard Autopilot technology. This price point is up 100% from a price of $5,000 as recently as May of last year. The price has been steadily rising as Tesla releases new features for the package. 

Despite the software package's name, Tesla vehicles with the "Full Self-Driving" autopilot upgrade can't drive themselves. But the electric-car company did recently release a beta update enabling full self-driving for some of its vehicles, as long as the driver is ready to take over at a moment's notice. Since the feature requires the full attention of the driver, the company hasn't quite achieved fully autonomous driving yet.

Over time, Tesla believes the new technology could be worth over $100,000. With such an ambitious view for the technology's potential value, it wouldn't be surprising to see Tesla begin selling the technology on a subscription basis, making the technology more accessible to customers unwilling to shell out for the upfront cost. In September, a Reddit user reverse-engineered an upgrade to Tesla's mobile app to reveal a "subscribe" section, suggesting Tesla may be considering doing exactly that.

With Tesla's "Full Self-Driving" upgrade for Autopilot becoming more valuable with every new feature the company releases, it wouldn't be surprising to see Tesla build a substantial software business over the next five years. Further, a subscription for the electric-car maker's "Full Self-Driving" option could accelerate adoption of the feature while also helping Tesla achieve a recurring revenue model.