Tesla, Inc. TSLA shares have been on a nine-session rally and bullish analysts have affirmed their confidence in the sustenance of the rally even as bears fret over the unsustainable valuation relative to the electric-vehicle maker’s fundamentals.
What Happened: Last Tuesday, when Tesla fans and influencers were discussing the stock rally seen since June 25, Tesla CEO Elon Musk butted in and said, “Once Tesla fully solves autonomy and has Optimus in volume production, anyone still holding a short position will be obliterated. Even Gates.”
Tesla autonomy refers to the company’s full self-driving (FSD) technology, which is currently running “supervised” and brings in recurring high-margin revenue. The company is perfecting the technology to use it unsupervised. The FSD is currently available for outright purchase at $8,000 and a monthly subscription to the technology costs a user $99. Perfecting the technology is a long-drawn process, given apprehensions among users and regulators regarding its efficacy and safety.
But once it comes to fruition, its uptake will increase, contributing more to the top line. Tesla can augment FSD revenue by out-licensing it to customers. Also, FSD is the vital technology behind the company’s proposed robotaxi project.
At Tesla’s annual shareholder meeting held in June, Musk said the Optimus humanoid robot can alone propel the company’s valuation to $25 trillion. The billionaire, however, did not specify a timeframe for the prediction.
See Also: How To Buy Tesla Stock
Future Fund’s Managing Partner Gary Black commented on Musk’s statement regarding the predicament for shorts.
Black noted that the Tesla chief previously issued similar comments in 2019-20 – a timeline when the company picked up its shreds from a turbulent phase and found huge success with its mass-market Model 3 and later Model Y EVs. “From July 2019 through Dec 2020 TSLA increased 15x,” the fund manager said.
Not Good Idea: With media outlets carrying reports of short bets facing massive mark-to-market losses, Black explained why shorting Tesla shares by hedge funds is a “dumb idea.”
The fund manager listed a 12-point rationale for his bullishness on Tesla, and these include:
- EV adoption growing at 20-25% per year
- Tesla earnings per share estimate revision trend likely turning positive after 18 months of declines
- EPS growing at over 30% year-over-year pace in 2025 after falling 24% in 2023 and potentially 23% in 2024
- Tesla substituting price cuts with low interest-rate loans
- Higher FSD take rates; the likelihood of licensing deal as the tech reaches 99.9% efficacy
- Tesla launching sub-$30K compact car in 2025
- Tesla delivery growth inflecting higher in the third quarter
- Energy business’ profit rising 10 times by 2030
- Tesla gaining a first-mover advantage in unsupervised, generalized robotaxi
- Breaking out FSD/AI as a separate business line in financial statements
- Fed potentially beginning rate cuts in 2024
- Optimus production beginning in 2026
Fed rate cuts, according to Black, will help long-duration, high P/E, already profitable names like Tesla. The fund manager sees Optimus serving a $20 trillion market opportunity.
Tesla ended Monday’s session up 0.56% at $252.94, according to Benzinga Pro data.
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