Investor's Corner
Tesla's battle lines are drawn with retail investors on one side and Wall St on another
There are very few stocks in the market that inspire such volatility as American electric car maker Tesla (NASDAQ:TSLA). The company has been on a tear lately, propelled by positive Q4 2019 results and emphasized by an ever-growing number of ardent supporters online. Yet amidst these victories, it appears that Tesla has finally reached a point where the battle lines are now being drawn between the company’s supporters, particularly its retail investors and analysts from Wall Street.
Tesla is a tricky company to evaluate, mainly since it covers several industries. The electric car maker is currently the second-largest automaker in the world by market value, though it only produces and delivers a fraction of the vehicles that veteran car companies sell every year. In 2019, Tesla sold just over 367,000 vehicles. Volkswagen, the third-largest automaker according to market cap, sold over 6 million units.
But the Tesla story is never just about the company’s electric cars. A look at Tesla’s mission shows that the company’s goals are bigger than just selling cars and making money doing so. Tesla aims to accelerate the world’s transition to sustainability, and making electric cars that are better than petrol-powered vehicles is but a crucial part of the puzzle. This also means that there are dimensions to the company that lies far beyond that of its electric car business.
It is this last point where the divergence is most evident between Tesla’s supporters and Wall Street analysts. Tesla shareholders, many of whom actually own the company’s products, are intimately familiar with CEO Elon Musk’s overall plans and goals, as well as the scope of the company’s numerous business. Very few of those who own a Model 3, for example, are not aware that Tesla also makes solar roof tiles, or residential batteries like Powerwalls, or grid-scale batteries like Megapacks for that matter.
Unfortunately, a good number of analysts who cover TSLA stock seem to be stuck under the impression that the company is an automaker, full stop. A look at analysts and critics who frequent media outlets such as CNBC shows that very few actually consider the potential, or even recognize the existence of Tesla Energy, a business that legendary billionaire Ron Baron believes could be just as big as the company’s electric car business. Even fewer acknowledge the value of Tesla’s Autopilot data, which are gathered from real-world miles.
This could be seen in Wall Street’s estimates on Waymo, a Google-based company aimed at developing and deploying a self-driving service. Morgan Stanley analyst Brian Nowak wrote in a note to clients last year that the startup is worth $105 billion because of its self-driving technology, and that’s a conservative estimate. Before last year’s update, Nowak valued Waymo at a far more optimistic $175 billion. In comparison, Tesla’s current valuation, as of last Friday’s close, stood at $134 billion. That amount included the company’s auto business, its energy business, and its autonomous driving tech.
As is the nature of Tesla stock, the company’s full potential is usually acknowledged and considered only by the company’s most ardent supporters on the Street. So for now, there is very little chance that the perception of Tesla between its retail supporters and traditional analysts will converge anytime soon. This divergence became a focal point in the company’s recent Q4 2019 earnings call, when Elon Musk admitted that retail investors might have a better grasp of the company’s plans than conventional Wall Street analysts.
“I do think that a lot of retail investors actually have deeper and more accurate insights than many of the big institutional investors and certainly better insight than many of the analysts. It seems like if people really looked at some of the smart retail investor analysts and what some of the smart smaller retail investors predicted about the future of Tesla, you would probably get the highest accuracy and remarkable insight from some of those predictions,” Musk said.
Tesla will likely remain a polarizing company for years to come. That said, Tesla Energy’s ramp is upon the market already, and the company’s Solarglass Roof V3 are now being installed to a growing number of homes in the United States. Tesla’s Full Self-Driving system is also closing in on being feature-complete. Overall, it seems that it will only be a matter of time before the true potential of Tesla emerges, and when it does, one would have to deny a whole lot of the company to consider it just as an automaker.
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Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.
In a new note to investors on Tuesday, Morgan Stanley analyst Andrew Percoco said that Tesla has one big financial question to answer for investors regarding its Robotaxi rollout, Full Self-Driving software, and Optimus.
Percoco said in the note that, for the most part, investors are still very positive about the direction the company is headed. However, there are some things the firm would like to see, and they have to do with financials.
Tesla (TSLA) Q2 2026 earnings results: miss on EPS, beat on revenue
Tesla bulls are more than convinced that the company’s Full Self-Driving software is proof it can develop physical AI. Financially, however, there are still some questions, especially on elevated spending, which CEO Elon Musk said would occur as the company works to roll out Robotaxi faster and continue developing its Optimus robot.
The latter two are where Tesla will have to prove progress to investors, as Percoco writes that both projects “will require clearer evidence that Robotaxi is scaling and more tangible Optimus proof points to support the ROI on elevated capex.”
Percoco said the second quarter earnings call did not change his long-term thesis of where Tesla is positioned in the AI race, which is out in front. However, there are concerns that weaker gross margins and higher R&D spend will stress financials, and that has “sharpened our (and investors’) focus on measurable progress across Robotaxi and Optimus.”
Additionally, Robotaxi still needs to be proven with more operation in existing cities while maintaining safety but improving how many rides it gives in any given time, he said. For Optimus, Percoco wrote that he is “still looking for evidence beyond commentary around SOP.”
Morgan Stanley put Percoco in charge of covering Tesla after long-time analyst Adam Jonas transitioned to the automotive side.
Currently, Morgan Stanley has a $415 price target on Tesla and a ‘Hold’ rating on the stock. It is trading at around $330 at the time of publication, which was 2:30 P.M. on the East Coast.
SpaceX’s massive investment in AI will make it a big winner, Argus Research said after the company’s successful earnings call last week.
The firm also upgraded shares to a Buy from Hold and set a $160 price target.
SpaceX (NASDAQ: SPCX) is currently recovering from its heavy AI infrastructure investments, as it spent nearly $16 billion in Q2 alone. The company did this primarily by monetizing high-demand GPU compute capacity at a much faster pace than traditional data center economics would suggest.
Company CFO Bret Johnsen said that SpaceX would be able to pay back anything on new deployments within a year.
There are plenty of ways the company can do this:
Leasing excess compute capacity through contracts
SpaceX has already built Colossus and Colossus II, largely for its own model training. However, much of that capacity is already rented out to third parties. It already has major deals with Anthropic, Google, and Reflection AI. These partnerships are adding billions per month to SpaceX’s spreadsheet.
High utilization driven by industry-wide scarcity
The demand for advanced AI training and inference capacity continues to exceed what is available for use. SpaceX can fill new racks quickly after they come online, so the capital deployed converts into revenue with minimal idle time.
Additionally, management and outside observers have described the new compute capital as behaving more like a cost-of-goods-sold than traditional multi-year capex, especially because of this rapid monetization pattern.
Capacity has already scaled from ~0.4 GW a year to 1.4 GW annually by the end of Q2. There are targets of more than 2 GW by year-end.
High incremental margins on the rental business once capacity is online
GPU cloud providers often operate at strong gross margins. SpaceX can monetize capacity that was already partially built or can be added efficiently. This means that incremental EBITDA margins on the rental revenue are usually high. This accelerates cash recovery relative to the gross capital outlay.
Parallel monetization of its own AI software and applications
Beyond pure infrastructure rental, SpaceX also generates revenue from Grok through subscriptions and usage, from X through ads, data, and other related services, enterprise APIs, and the planned integration of the Cursor coding tools acquisition.
These application layers ride on the same compute infrastructure and provide additional high-margin streams that could offset build-out costs. AI-segment revenue overall rose sharply to about $2.6 billion in Q2, according to Motley Fool. This was driven primarily by the infrastructure contracts, but the software side is also partially responsible.
Efficient, large-scale deployment and vertical integration advantages
SpaceX has emphasized the rapid construction of power and cooling infrastructure and favorable cost-per-megawatt economics relative to industry benchmarks in some disclosures.
Combined with its ability to scale capacity aggressively and the fact that many contracts start generating revenue within months of capacity coming online, the effective payback compresses dramatically compared with more conventional multi-year data-center projects.
SpaceX’s dominant near-term recovery path will turn the AI clusters into a hyperscale-style compute rental business for other leading AI companies while still using a portion for internal models.
Elon Musk
Another Tesla SpaceX merger prediction by ARK Invest has Elon Musk talking
Elon Musk again denies a Tesla China split as new SpaceX merger speculation resurfaces quickly.
Elon Musk restated that Tesla has no plans to separate its China business from the rest of the company, responding to a new round of merger speculation from ARK Invest.
On the firm’s “Brainstorm” podcast, Cathie Wood’s team, including chief futurist Brett Winton and research director Nick Grous, argued a Tesla and SpaceX combination remains likely, with an announcement possible before the end of the year even if the deal itself would not close that quickly. Winton called Tesla’s Shanghai operations a “small ish wrinkle” for a merger rather than a real obstacle, since SpaceX’s national security work with the U.S. government sits uneasily next to Tesla’s manufacturing base in China.
Musk pushed back on the framing directly. “China is awesome. I strongly encourage people to visit,” he wrote on X. He also repeated language he first used in late July, when the Wall Street Journal reported that Tesla executives had been told to prepare for a possible spinoff, sale, or closure of the China business ahead of a SpaceX tie up. Musk called that report “absurdly fake news” at the time, adding that a separation had “never even come up in a discussion ever,” a line he echoed again this week.
The repeated denial has not settled the underlying question, because Shanghai’s role in Tesla’s business is exactly what makes a merger complicated. Gigafactory Shanghai still ships more than half of Tesla’s global deliveries and functions as the company’s main export hub for Europe and Asia. Teslarati previously reported on Musk’s initial denial, and the merger conversation itself has been building since SpaceX’s IPO gave it public shares to use as acquisition currency.
Wedbush’s Dan Ives has pegged the odds of a Tesla SpaceX merger at 80 to 90 percent by early 2027, and ARK’s prediction of a year end announcement adds another data point to that timeline, even as Musk keeps rejecting the specific mechanics reporters have described. Neither position rules out the other. Musk can deny a China spinoff was ever discussed while analysts still expect some form of combination to move forward, since ARK and Ives are both describing convergence at the corporate level, not necessarily the internal restructuring the Journal described in July.
For now, Tesla’s China business remains intact, and Musk’s comments this week make clear he has no interest in publicly walking that position back, no matter how often the merger question resurfaces.
Tesla has one big financial question to answer for investors: Morgan Stanley
SpaceX AI investment gamble will make it a big winner, firm says
