Morgan Stanley "Tesla Fans": Buy before the release of "Master Plan Part Deux"!

Elon Musk announced that he is developing Tesla's next strategic plan. In the eyes of the market, this seems a bit hasty, especially since the second chapter is not yet complete, and the third chapter was only announced a year ago.

However, in the view of Morgan Stanley, a staunch supporter of Tesla, this may be a positive signal, suggesting that investors should buy Tesla stock before the fourth chapter is announced.

Morgan Stanley analyst Adam Jonas stated in a recent report that the fourth chapter is expected to be supported by artificial intelligence, robotics, and hybrid computing technologies, linking Tesla with Musk's other ventures (including SpaceX, Starlink, X, and xAI). Investors should be prepared for this.

"Epic"

Earlier this week, Musk wrote on Twitter that he is working on "Tesla Master Plan Part 4," and it will be "epic."

However, he did not reveal more details about the fourth chapter. Considering the time span from the initial leak to the official release of "Master Plan 3," Tesla's new chapter may not be unveiled until 2025.

Master Plan with Three Chapters, Two Yet to Be Completed

In the first three chapters, Musk laid out ambitious plans for Tesla:

On August 2, 2006, Musk published a blog post titled "The Secret Tesla Motors Master Plan (just between you and me)," unveiling the first chapter of Tesla's master plan:

Step 1: Build a low-volume, high-end car;

Step 2: Use the money to develop a medium-volume, more affordable car;

Step 3: Use the money to create a high-volume, affordable car;

Step 4: Provide solar power.

Over the next decade, Tesla achieved this goal through the Roadster, Model S, and Model 3.

In 2016, during the delivery of the Model 3 and the acquisition of SolarCity, Musk announced "Tesla Master Plan Part Deux":

Develop aesthetically pleasing solar roofs with seamlessly integrated battery storage;

Expand the electric vehicle product line to cover all major segments;

Develop self-driving technology that is 10 times safer than manual driving through fleet learning;

Allow vehicles to make money for owners through sharing when not in use.

Other segment vehicles mentioned in the second chapter include a "new type of pickup truck" (later the Cybertruck), a compact SUV (Model Y), a heavy-duty truck (Tesla Semi), and finally, a "high passenger-density urban transport vehicle." Currently, apart from "high-density urban transportation vehicles," every new model in the second chapter has been released, with most of them put into production.

Seven years later, in 2023, Elon Musk made a high-profile announcement of Tesla's grand plan for the third chapter:

Achieve 240TWh of energy storage, 30TW of green power generation, and a $10 trillion manufacturing investment,

Using less than 0.2% of land area to achieve 10% of the world's GDP.

The second and third chapters of the grand plan are far from complete, and Musk is already eager to engage in the formulation of the fourth chapter.

So, what ambitious plans will the fourth chapter have?

Will the fourth chapter focus on artificial intelligence and robots?

Morgan Stanley analyst Adam Jonas said that for a leader in electric vehicles, this will be "anything but cars."

Okay, Tesla will still make cars, but we believe investors should be prepared for other things.

We expect the fourth chapter to be supported by Tesla's business ambitions in artificial intelligence, robotics, and hybrid computing (including distributed thermal computing in cars), involving everything from cloud to edge technology.

The leapfrog progress in artificial intelligence technology over the past two years may be one of the considerations for Musk to accelerate the update of the grand plan.

Therefore, Jonas believes that the fourth chapter may link Tesla with Musk's other ventures (including SpaceX, Starlink, X, and xAI), and investors should be prepared for it.

Is Musk opening up new revenue sources? Morgan Stanley: Tesla

Jonas also compared Tesla to other tech giants, believing that for Tesla, cars are like video game chips for NVIDIA, book sales for Amazon, although it is the core business, the company must find new sources of revenue.

The car business is still crucial to Tesla, but in the next 6 to 12 months, we believe its impact on Tesla's fundamentals and valuation may decrease, thanks to the softness in the electric vehicle market and the introduction of new product categories.

Despite the mixed views on Tesla's future on Wall Street, Jonas remains bullish on Tesla, giving an overweight (buy) rating and a target price of up to $310, about 67% higher than the current stock price.

In contrast, most analysts have a hold rating on Tesla, with an average target price of $176.96, expecting the stock to decline by 4% in the coming months