The only reason to buy Tesla stock has nothing to do with its EV business, market strategist says
2023-07-20 - Scroll down for original article
Company: Tesla Inc.
Summary
Tesla Inc. is an American electric vehicle and clean energy company founded by Elon Musk. The company manufactures electric cars, solar energy products, and energy storage solutions. Tesla has gained significant market share in the electric vehicle industry and is known for its innovative technology and brand reputation. The company's stock price has experienced substantial growth and currently has a market valuation of $918 billion.
Article Analysis
The article highlights that Tesla's stock price has soared this year, primarily driven by the company's growth in electric vehicle deliveries. However, it suggests that the only reason to buy Tesla stock at its current levels is if investors believe in the potential of its self-driving technology. The author argues that the traditional auto industry has not rewarded companies for selling millions of cars, and Tesla's valuation largely depends on the success of its autonomous driving capabilities.
Market Reaction
The article does not mention the immediate market reaction to this news. However, given Tesla's strong performance in recent years and the growing interest in autonomous driving technology, it is possible that investors may have already priced in the potential upside from this aspect of Tesla's business.
Investor Sentiment
The sentiment towards Tesla among investors is likely positive, considering the company's impressive stock performance and its position as a market leader in the electric vehicle sector. However, there may be some uncertainty regarding the success and timing of Tesla's self-driving technology. Investors with a high degree of conviction in Tesla's ability to deliver on autonomous driving may continue to be bullish on the stock.
Competitor Comparison
In terms of electric vehicle manufacturers, Tesla remains a dominant player with a significant market share. While the article mentions legacy automakers such as General Motors, Ford, Honda, and Mercedes, their stock prices have not experienced the same level of growth as Tesla. Tesla's strong brand and innovative approach to electric vehicles provide it with a competitive advantage over its rivals.
Risk Factors
The main risk highlighted in the article is the successful development and deployment of Tesla's self-driving technology. If the company fails to achieve this milestone, it could lead to a significant decline in Tesla's stock price. Other risks worth considering include increasing competition in the electric vehicle market, potential regulatory challenges, and the dependence on government incentives and subsidies.
Conclusion
The article suggests that the price of Tesla stock is primarily dependent on the success of its autonomous driving technology. Investors who believe in Tesla's ability to achieve fully autonomous vehicles may find potential upside in the stock. However, there are associated risks, and the valuation could be significantly impacted if Tesla fails to deliver on this front. Investors should closely monitor updates on Tesla's autonomous driving progress and assess the competitive landscape within the electric vehicle industry.
Disclaimer
This financial report is for informational purposes only and does not constitute financial advice. Investors should conduct their own research and consult with a financial professional before making any investment decisions.
Original Article:
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The only reason to buy Tesla stock has nothing to do with its EV business, market strategist says A screenshot from Tesla's 2016 self-driving car ad showing the car stopped at a red light. Tesla Tesla competes in an industry that has not been kind to its investors over the past few decades. Shares of General Motors, Ford, Honda, and Mercedes are trading at the same price today as they were over a decade ago. When it comes to Tesla stock, the only reason to buy has nothing to do with its electric vehicle business. Tesla stock has soared 142% year-to-date and its valuation has cruised past $900 billion as investors cheer the company's continued growth in its electric vehicle deliveries. But according to a Wednesday note from DataTrek Research co-founder Nicholas Colas, there's only one reason to buy Tesla stock at its current levels, and it has nothing to do with its EV business. The car industry is difficult to compete in, as evidenced by the current stock prices of legacy automakers, he observed. Shares of Ford and Mercedes are trading at the same prices today as they were in in the 1990s, Honda is where it was in January 2006, and General Motors is at August 2013 levels. Clearly, investors have not been rewarding auto companies for simply selling millions of cars every year, even as legacy automakers transition their fleet to fully electric vehicles. So when it comes to Tesla stock, don't just look at its EV sales, according to Colas. To buy Tesla at its current valuation of $918 billion and expect further upside, an investor has to believe that the company's self-driving technology is close to reaching a truly autonomous threshold that can enable the robotaxi thesis commonly echoed by Ark Invest's Cathie Wood. Colas estimated that about $600 billion to $700 billion of Tesla's current market value is "a call option on autonomous driving." "Even Elon Musk himself has said Tesla is worth almost nothing without this technology. If and when autonomous is ready for prime time, Tesla should be there first or at least early. That is a trillion-dollar opportunity at the very least. But it is also an incredibly difficult challenge to make a truly self-driving car," Colas said. The remaining $200 billion to $300 billion of Tesla's current market valuation is assigned to the company's EV business, which is comparable to Toyota's current market valuation. Both Toyota and Tesla "will almost certainly be around in 20 years making cars. I cannot confidently say the same thing about any other auto company in existence today. That's how hard the next two decades will be on this industry," Colas said. That means if Tesla fails to deliver on full autonomous driving technology, its stock could plunge about 70% based on Colas' valuation model. "The investment takeaway is pretty clear cut: avoid traditional auto stocks, and only overweight Tesla if you have a degree of conviction that Musk and his team can soon deliver a truly autonomous vehicle," he said. Read the original article on Business Insider