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Tesla Full Self-Driving (FSD) potential recognized by RBC Capital analyst

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It appears that some analysts are starting to recognize the significance of Tesla’s (NASDAQ:TSLA) Full Self Driving (FSD) efforts to the company’s future. This was hinted at in comments from RBC Capital analyst Tom Narayan, who noted that FSD in China would be “significant.” 

The RBC analyst also reiterated an “Outperform” rating for TSLA stock, as well as a price target of $293 per share. As noted in an Insider report, Narayan covers the Consumer Cyclical sector, and he focuses on stocks like Tesla, Ferrari, and the Mercedes-Benz Group. He also has a 54.50% success rate on his recommended stocks. 

Narayan echoed some of Tesla CEO Elon Musk’s longtime points about FSD in his report, noting that such systems could eventually become mandated by regulators as a life-saving tool. The analysts noted that as systems like FSD are recognized for their benefit to consumers, Tesla could see some potential as a provider of the system. 

Following is the RBC analyst’s comments on Tesla FSD: 

“What do we think? Winning FSD in China would be significant. It would unlock a significant fleet of Tesla vehicles able to charge subscription fees. This is central to our investment thesis on the stock and we do include some Tesla FSD capture in China. Importantly, while initially we envision several Level 2+ players, it pushes Tesla further to be an industry standard for software. 

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“We also envision a scenario where regulators mandate Level 2+ as a life-saving tool. Tesla FSD is 5x safer than the US fleet according to US accident data provided by the company. In the same way seat belts and airbags were mandated on vehicles we could see Level 2+ offerings. Another benefit could be increasing the chance for Tesla to license software to other OEMs. This is a small part of our thesis however as remains a call option. 

“One concern we have heard voiced from investors’ concerns whether Chinese companies could pirate the software but FSD is more than software. It includes millions of hours of driving data from autopilot interactions and algorithm training which happens in the US. This could happen quicker than the FSD Licensing. FSD is 20% of our valuation and we have assumed only 8% market share.”

Tesla noted in its Q1 2024 Update Letter that FSD users have passed 1.3 billion cumulative miles. Interestingly enough, Musk noted in Master Plan Part Deux, which he wrote lack back in July 2016, that he believes worldwide regulatory approval for autonomous vehicles would require something on the other of 6 billion cumulative miles (10 billion kilometers). If Tesla successfully rolls out FSD in China, and if more customers opt in for the service, the idea of hitting 6 billion cumulative miles would be more than feasible.

Don’t hesitate to contact us with news tips. Just send a message to simon@teslarati.com to give us a heads up.

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Simon is an experienced automotive reporter with a passion for electric cars and clean energy. Fascinated by the world envisioned by Elon Musk, he hopes to make it to Mars (at least as a tourist) someday. For stories or tips--or even to just say a simple hello--send a message to his email, simon@teslarati.com or his handle on X, @ResidentSponge.

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Investor's Corner

Tesla bear turns bullish for two reasons as stock continues boost

“I think from a trading perspective, it looks very interesting,” Nathan said, citing numerous signs of strength, such as holding its 200-day moving average and holding against its resistance level.

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Credit: Tesla Manufacturing

A Tesla bear is changing his tune, turning bullish for two reasons as the company’s stock has continued to get a boost over the past month.

Dan Nathan, a notorious skeptic of Tesla shares, said he is changing his tune, at least in the short term, on the company’s stock because of “technicals and sentiment,” believing the company is on track for a strong Q3, but also an investment story that will slowly veer away from its automotive business.

“I think from a trading perspective, it looks very interesting,” Nathan said, citing numerous signs of strength, such as holding its 200-day moving average and holding against its resistance level.

He also said he believes a rally for the stock could continue as it heads into the end of the quarter, especially as the $7,500 electric vehicle tax credit is coming to an end at the end of the month.

With that being said, he believes the consensus for Q3 deliveries is “probably low,” as he believes Wall Street is likely underestimating what Tesla will bring to the table on October 1 or 2 when it reports numbers for the quarter.

Tesla shares are already up over five percent today, with gains exceeding nine percent over the past five trading days, and more than fourteen percent in the past month.

While some analysts are looking at the performance of other Mag 7 stocks, movement on rates from the Federal Reserve, and other broader market factors as reasoning for Tesla’s strong performance, it appears some movement could be related to the company’s recent developments instead.

Over the past week, Tesla has made some strides in its Robotaxi program, including a new license to test the platform in the State of Nevada, which we reported on.

Tesla lands regulatory green light for Robotaxi testing in new state

Additionally, the company is riding the tails of the end of the EV tax credit, as inventory, both new and used, is running extremely low, generally speaking. Many markets do not have any vehicles to purchase as of right now, making delivery by September 30 extremely difficult.

However, there has been some adjustments to the guidelines by the IRS, which can be read here:

Tesla set to win big after IRS adjusts EV tax credit rules

Tesla is trading at around $389 at 10:56 a.m. on the East Coast.

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Elon Musk

Analyst: Elon Musk’s $1 trillion Tesla pay deal modest against robot market potential

Jonas highlighted Tesla’s longer-term ambitions in robotics as a key factor in his assessment.

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Credit: Tesla

Morgan Stanley analyst Adam Jonas, one of Wall Street’s most ardent Tesla (NASDAQ:TSLA) bulls today, has described Elon Musk’s newly proposed $1 trillion performance-based compensation package as a “good deal” for investors. 

In a note shared this week, Jonas argued that the package helps align the interests of Musk and Tesla’s minority shareholders, despite its shockingly high headline number.

Future market opportunities

Jonas highlighted Tesla’s longer-term ambitions in robotics as a key factor in his assessment. “Yes, a trillion bucks is a big number, but (it) is rather modest compared to the size of the market opportunity,” Jonas wrote. He added that the humanoid robot market could ultimately surpass the size of today’s global labor market “by a significant multiple.”

“We have entertained scenarios where the humanoid robot market can exceed the size of today’s global labor market… by a significant multiple,” Jonas wrote, as shared on X by Tesla watcher Sawyer Merritt.

The analyst likened the arrival of AI-powered robotics to the transformative effect of electricity, noting that “contemplating future global GDP before AI robots is like contemplating global GDP before electricity.” The Morgan Stanley analyst’s insights align with the idea that as much as 80% of Tesla’s future valuation could be tied to its Optimus humanoid robot program.

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Elon Musk’s pay package

Tesla’s board has tied Elon Musk’s proposed compensation package to some of the most ambitious targets in corporate history. The 2025 CEO Performance Award requires the automaker’s valuation to soar from roughly $1.1 trillion today to $8.5 trillion over the next decade, a level that would make Tesla the most valuable company in existence.

The plan also demands a leap in Tesla’s operating profit, from $17 billion in 2024 to $400 billion annually. It also ties the CEO’s compensation to a number of product milestones, including the delivery of 20 million vehicles in total, 10 million active Full Self-Driving subscriptions, 1 million Tesla Bots, and 1 million Robotaxis in operation. Tesla’s board emphasized that Musk’s leadership was fundamental to achieving such ambitious goals, with Chair Robyn Denholm noting the award would align the CEO’s incentives with long-term shareholder value.

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Elon Musk

Tesla board reveals reasoning for CEO Elon Musk’s new $1 trillion pay package

“Yes, you read that correctly: in 2018, Elon had to grow Tesla by billions; in 2025, he has to grow Tesla by trillions — to be exact, he must create nearly $7.5 trillion in value for shareholders for him to receive the full award.”

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(Credit: Tesla)

Tesla’s Board of Directors has proposed a new pay package for company CEO Elon Musk that would result in $1 trillion in stock offerings if he is able to meet several lofty performance targets.

Musk, who has not been meaningfully compensated since 2017, completed his last pay package by delivering billions in shareholder value through a variety of performance-based “tranches,” which were met and resulted in the award of billions in stock.

Elon Musk’s new pay plan ties trillionaire status to Tesla’s $8.5 trillion valuation

However, Musk was unable to claim this award due to a ruling by the Delaware Chancery Court, which deemed the payout an “unfathomable sum.”

Now, the company is taking steps to ensure Musk gets paid, as the Board feels that it is crucial to retain its CEO, who has been responsible for much of the company’s success.

This is not a statement to undermine the work of all of Tesla’s terrific employees, but a ship needs to be captained by someone, and Musk has proven he is the right person for the job.

The Board also believes that, based on a statement made by the company in its proxy, various issues will be discussed during the upcoming Shareholder Meeting.

Robyn Denholm and Kathleen Wilson-Thompson recognized Musk’s contributions in a statement, which encouraged shareholders to vote to approve the payout:

“We’re asking you to approve the 2025 CEO Performance Award. In designing the new performance award, we explored numerous alternatives. Ultimately, the new award aims to build upon the success of the 2018 CEO Performance Award framework, which ensure that Elon was only paid for the performance delivered and incentivized to guide Tesla through a period of meteoric growth. The 2025 CEO Performance Award similarly challegnes Elon to again meet a series of even more aspirational goals, including operational milestones focused on reaching Adjusted EBITDA targets (thresholds that are up to 28 times higher than the 2108 CEO Performance Award’s top Adjusted EBITDA milestone) and rolling out new or expanded product offerings (including 1 million Robotaxis in commercial operation and delivery of 1 million AI Bots), all while growing the company’s market capitalization by trillions of dollars.

Yes, you read that correctly: in 2018, Elon had to grow Tesla by billions; in 2025, he has to grow Tesla by trillions — to be exact, he must create nearly $7.5 trillion in value for shareholders for him to receive the full award.

In addition to these unprecedented performance milestones, the 2025 CEO Performance Award also includes innovative structural features, born out of the special committee’s considered analysis and extensive shareholder feedback. These features include supercharged retention (at least seven and a half years and up to 10 years to vest in the full award), structural protections to minimize stock price volatility due to administration of this award and, thereafter, incentives for Elon to participate in the Board’s continued development of a framework for long-term CEO Succession. If Elon achieves all the performance milestones under this principle-based 2025 CEO Performance Award, his leadership will propel Tesla to become the most valuable company in history.”

Musk will have a lot of things to accomplish to receive the 423,743,904 shares, which are divided into 12 tranches.

However, the Board feels he is the right person for the job, and they want him to remain the CEO. This package should ensure that he stays with Tesla, as long as shareholders feel the same way.

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