Title: Why Investing in Tesla Stock Requires Belief in This One Future Vision, According to Elon Musk
Titled: Navigating Tesla's Autonomous Future: Musk's Take on Investing
Tesla, known for its electric vehicles and futuristic aspirations, has the ability to send investors into ecstatic euphoria or downright despair in equal measure. The stock has skyrocketed over the last five years, yet skepticism persists over the company's valuation and CEO Elon Musk's unpredictability. While sentiment remains polarized, what course should a rational investor chart with Tesla stock? Allow us to delve into the words of Tesla's maverick leader himself to find the answer.
Musk's Crystal Clear Direction
While Tesla thrives in producing electric vehicles, installing solar energy products, and providing power storage solutions, Musk shed a different light on investing during the Q1 earnings call. He highlighted the importance of autonomous driving in Tesla's future and hinted that those who doubt its ability to solve autonomy should steer clear of buying Tesla stock.
When Musk mentioned autonomy, he was specifically referring to the idea of autonomous taxis, or "robotaxis." Tesla proudly announced it would enable car owners to join the robotaxi fleet, while also boasting its own dedicated, driverless fleet. The vision is for commuters to simply request rides via an app and let a robotaxi navigate to their destination.
The twofold benefit of this robotaxi system is palpable: it not only encourages Tesla owners to purchase vehicles, offering potential yearly earnings of $10,000 to $30,000 in exchange for joining the network, but it also bolsters Tesla's revenue stream from the direct sale of robotaxi rides.
Investment guru Cathie Wood, the brains behind Ark Invest, is a notable Tesla bull, setting an ambitious price target of $2,000 per share by 2027. However, many investors may underestimate the extent to which this optimistic outlook hinges on the success of the robotaxi concept.
By 2027, Ark Invest hypothesizes that Tesla's robotaxi business alone could account for two-thirds of the company's enterprise value. Given this, it's clear that Elon Musk is staking a significant portion of Tesla's success on solving autonomy.
So, What's a Neutral Investor to Do?
To reiterate, in order to invest in Tesla stock, Musk would have investors believe the company can succeed in autonomy. Given that autonomous vehicles and services are not a novel concept, it's worth examining what blocks Tesla's progress.
While the technology required for autonomy is technically feasible, achieving regulatory approval remains an uphill battle. Many establishments, including GM's Cruise and Alphabet's Waymo, have already demonstrated promising self-driving capabilities. Cruise temporarily halted operations following an accident but has persevered in major US cities, while Waymo has even partnered with Uber and Lyft on autonomous driving developments.
Consequently, Tesla's lack of progress in launching its robotaxi service is naturally raising concerns. Tesla, too, has made autonomous driving strides, but Musk noted past regulatory approval as presenting a formidable obstacle.
Moreover, Musk elucidated a future where every Tesla is employed as a robotaxi for up to 100 hours each week. This dream scenario, which many investors have adopted as a given, could lead to a substantial revenue stream for Tesla. However, the pragmatist might not wholeheartedly agree with this extreme optimism.
Even if Tesla's entire fleet is reconfigured for the robotaxi role, the sheer volume of daily use and charging time means there is a limit to how much demand can be met. In all honesty, the country's ride-hailing market likely does not boast the demand necessary to keep a million robotaxis in continuous motion.
With that in mind, it's crucial to remain realistic about Tesla's progress in autonomy and to consider whether the company has the demand and regulatory support needed to bring its ambitions to fruition. Ultimately, it's up to each investor to evaluate for themselves whether they share Musk's belief in Tesla's ability to solve autonomy.
In light of Musk's emphasis on autonomous driving as Tesla's future, investors contemplating investing in Tesla stock should carefully consider if they believe in the company's ability to master autonomy, given the technical feasibility and the challenges in obtaining regulatory approval.
Given Musk's vision of every Tesla being employed as a robotaxi for an extended period, investors should assess whether the ride-hailing market has the demand to support a million robotaxis in continuous motion and whether Tesla has the necessary regulatory support to bring this ambition to fruition. This realistic evaluation will help investors make an informed decision about investing their money in Tesla's finance.
