Tesla (TSLA) stock fell 12% on Wednesday after the company posted weaker-than-expected profits and signaled slower growth in its traditional auto business.
But to CEO Elon Musk, investors really need to answer only one question when it comes to judging what the stock is worth.
“The value of Tesla overwhelmingly is autonomy,” Musk said when asked on the company’s conference call Tuesday about how the potential for fewer electric vehicle tax credits could impact Tesla’s business. “These other things are in the noise relative to autonomy.”
Musk added that anyone who doesn’t believe the company will solve vehicle autonomy should “sell their Tesla stock.”
“If you believe Tesla will solve autonomy, you should buy Tesla stock,” Musk said. “And all these other questions are in the noise.”
On Tuesday, Tesla also announced it will reveal plans for its much-hyped robotaxi on Oct. 10, a two-month delay from its initial Aug. 8 plans. Elsewhere on the call, Musk approvingly cited research from Ark Invest that said the eventual market cap for the service would land somewhere in the trillions.
“At that point, I’m not sure what money even means,” Musk said.
But in the short term, money still means something, especially to investors who dumped the stock on Wednesday and Wall Street analysts who questioned Musk’s idealistic tone on the company’s earnings call.
“We believe any payoff from such initiatives are further out, so on earnings updates, the realities of the business fall back to (mostly) auto,” UBS Investment Bank analyst Joseph Spak wrote in a note to clients on Tuesday.
Spak reasons that the value of Tesla’s auto and energy business means the stock is likely worth about $74 a share, or about one-third of its current price.
But if stock valuations are a number today multiplied by a story about tomorrow, Musk has consistently chosen the most appealing — and interesting — story to tell investors.
A strategy that helps explain why Musk’s auto company trades at a significant premium to any other company in the sector.
For Musk’s crowd of retail investors, the bolder the bet, the more enthusiastic the response. On Wall Street, analysts who can’t properly plug Musk’s vision into a financial model may struggle to keep pace.
And even if autonomy presents investors with an “in or out” conundrum, the biggest opportunity for Tesla may even lie elsewhere in the business.
On Tuesday, Musk said the potential total addressable market for Tesla’s Optimus robot, which has yet to hit the market, is one for every person on Earth (read: 8 billion). And even that might not be a big enough goal.
“I think the long-term value of Optimus will exceed that of everything else that Tesla [does] combined,” Musk said.
“I think everyone on earth is going to want one. There are 8 billion people on Earth. So it’s 8 billion right there. Then you’ve got all of the industrial uses, which is probably at least as much, if not way more. So I suspect that the long-term demand for general-purpose humanoid robots is in excess of 20 billion units.”
Anything less, to use Musk’s words, is just noise.
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News Source and Full Credits: Yahoo Finance.
