Lofty Expectations Meet Lofty Valuations at Tesla’s 2023 Investor Day

Lofty Expectations Meet Lofty Valuations at Tesla’s 2023 Investor Day

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Tesla stalls out after hearing Musk’s Master Plan. Source: TradingView

Elon Musk took the stage on Wednesday night for his first ever “investor day” – which is ironic, because this “investor day” didn’t seem to make many investors very happy. After Tesla CEO Elon Musk revealed his Master Plan, Tesla stock plummeted roughly 8% by market open before recovering some of the losses as the trading day went on.

What Happened at Tesla’s 2023 Investor Day

Some investors hoped that Elon Musk’s Master Plan would contain concrete details about the Model 2 – an “affordable” Tesla EV previously expected to release somewhere around 2023. The Model 2 is rumored to start around $25,000 and is still believed to support the autonomous driving feature. However, instead of the Model 2, investors saw a model of two tarps.

A model of two tarps. Source: Tesla’s Investor Day Presentation

Musk didn’t say much about what lies beneath the “700M” tarp other than mentioning that new products would be released at a “later date.” While it lacked the fanfare of a product launch (the Cybertruck launch was described by Tesla analyst Ross Gerber as “basically a party”), Tesla’s 2023 Investor Day still delivered plenty of lofty expectations for the future. Those were detailed in Elon Musk’s Master Plan 3.

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What is Elon Musk’s Master Plan?

Elon Musk’s Master Plan encompasses far more than just what was said at Tesla’s 2023 Investor Day. It’s actually a series of long-term goals that Musk first published several years ago. The key elements of Musk’s pre-established long-term master plan for Tesla are as follows:

  1. Create a low-volume, expensive car: Musk’s first goal for Tesla was to create a high-end sports car that would generate enough revenue to fund the development of more affordable electric vehicles.
  2. Use that money to develop a medium-volume car: Once Tesla had established itself as a luxury carmaker, Musk planned to use the profits to develop a more affordable electric car for mainstream consumers.
  3. Use that money to create an affordable, high-volume car: Musk’s ultimate goal for Tesla was to create an affordable electric car that could be sold in high volumes, making electric vehicles accessible to the masses.
  4. Provide solar power: Musk also envisioned Tesla as a company that would provide solar power for homes and businesses, in addition to electric cars.
  5. Integrate energy generation and storage: Finally, Musk planned to integrate energy generation and storage, using Tesla’s battery technology to store energy generated by solar panels.
  6. Bonus (From the 2016 “Master Plan, Part Deux”): Enable your car to make money for you when you aren’t using it.

Of course, this is a far simplified version of the plan, and Wednesday night’s events were just one step toward making these happen.

Specifically, at the Tesla Investor Day, Elon Musk announced “Master Plan Part 3,” which included an announcement of a new milestone: 4 million vehicles produced. That’s a long way from where it came from – it took Tesla 12 years to build the first million vehicles. Within 3 years, they had built three million more. That’s nothing compared to Musk’s future goal:

“Tesla will produce 20 million Tesla’s per-year by 2030.”

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This would be a record, with the current record set by Volkswagen more than a decade ago. However, hitting this goal will be no easy task. According to Tesla CFO Zach Kirkhorn, Tesla will have to 6X its current investments in order to reach the goal. That equates to roughly $175 billion dollars.

Additionally, Musk’s main “selling-point” for investors at the Tesla Investor Day was a promise to cut costs of next-gen cars in half. Tesla will utilize an “unboxed” model which will involve “snapping together” large vehicle parts – something that Chief Engineer Lars Moravy says will reduce production complexity. A recently announced factory being built in Mexico (which will use recycled water) will also help Tesla reach their long-term goals of transitioning the world to sustainable energy.

What analysts had to say about Tesla’s Investor Day

While it failed to boost the stock price, the heavy focus on cost-cutting gave Wall Street analysts something to cheer over. In an environment where the “E” in “PE ratio” is consistently under scrutiny, a promise to cut production costs in half is highly welcomed. 

Ross Gerber’s praise makes sense. Gerber is a well-known Tesla bull. But what about the bears? Morgan Stanley (whose Chief Investment Officer Mike Wilson believes that the SPX is about to plummet 20%) had extremely positive things to say. Analyst Adam Jonas reportedly said:

Morgan Stanley wasn’t alone. Dan Ives at Wedbush reiterated Tesla as an outperform with a $225 dollar price target. Goldman Sachs analysts added that the Tesla Investor Day should increase investor confidence. Goldman Sachs has a $200 price target on Tesla shares.

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