Tesla Inc. TSLA CEO Elon Musk teased “Master Plan 4” for the electric-vehicle maker earlier this week, promising that it will be “epic,” and a bullish analyst on Thursday added to the excitement by calling upon Tesla investors to be prepared for something else other than cars.
The Tesla Analyst: Morgan Stanley’s Adam Jonas reiterated an Overweight rating on Tesla shares and a $310 price target, implying a 70.73% upside from current levels.
The Tesla Thesis
Potential Master Plan 4 Blueprint: “Anything but cars,” said Jonas in the note regarding what could be part of Tesla’s Master Plan 4. “This will outline the “next strategic phase of Tesla’s scientific and business evolution,” the analyst said. “Ok, Tesla will still make cars, but we think investors should prepare for something else.”
The Master Plan 4 (MP4) is seen as Musk’s acknowledgment that China may have won the battle for affordable traditional EVs, Jonas said. He also delved into the likely focus of the plan.
AI and robotics, according to the analyst, have opened up new total addressable markets for Tesla, moving the company deeper into new disciplines, he said. He expects the plan to be underpinned by “Tesla’s commercial ambitions in AI, robotics, hybrid computer,” including distributed thermal and computing in the car, spanning from cloud to edge.
“Investors should prepare for MP4 to more conspicuously connect Tesla with Elon’s other controlled enterprises such as SpaceX/Starlink, X and xAI,” he added.
To clarify his point further, Jonas equated Tesla to Nvidia and Amazon at their starting phases. “The car is to Tesla what the video game chip is to Nvidia. The car is to Tesla what selling books is to Amazon,” he said.
The analyst expects the car business to remain a key component of Tesla. But over the next six to 12 months, it may matter less to the company’s fundamentals and valuation due to the weakness in the EV market and the opportunities presented by new product categories, he said.
Jonas sees MP4 likely focusing on autonomy in a broader sense and not merely robotaxis. There are many other “form factors” of autonomy other than just the autonomous car, he said.
Humanoid robots could also be a big opportunity, the analyst said, citing Musk’s comments at the annual shareholder meeting that they will eventually outnumber humans by 2:1 or more.
See Also: Everything You Need To Know About Tesla
Rationale Behind Bullishness: Tesla is currently going through a lean fundamental patch, dragged by slowing EV adoption, an inclement economy, and some strategic missteps by the management. However, Jonas explained why he remained bullish on the company despite the predicament.
The analyst believes Tesla has all “significant attributes” to be valued as an AI company but for that to happen it must stem the negative earnings revisions within the auto business. “We do not believe Tesla will get credit as an AI company as long as core auto earnings are being revised down,” he said, adding that it might take a few more quarters to accomplish it.
Until such time, the analyst expects his bear-cash scenario of $100 to be in play.
Jonas said Morgan Stanley values Tesla both as an auto stock and an energy, AI/robotics company. The valuation the firm ascribes to the auto business is merely $67 per share, representing 20% of its price target, he added.
The analyst said investors may be well advised to take cognizance of the opportunity presented by Tesla’s other plays, including recurring revenue opportunity from the Tesla fleet. He also sees opportunities in other areas such as Optimus, which he has not included in his model.
Tesla Price Action: Tesla ended Thursday’s session down 1.78% at $181.57, according to Benzinga Pro data. The stock has shed nearly 27% so far this year even as most of its mega-cap tech stocks trade at or just off record highs.
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