Investor's Corner
Tesla (TSLA) stock is starting to resemble Netflix before its massive rally in 2011
The past few months have challenging for Tesla (NASDAQ:TSLA) investors, but if recent signs are any indication, it appears that the electric car maker might show some recovery in the stock market soon. According to an advisory firm founder, Tesla stock has all but reached a point that is incredibly similar to that of Netflix back in 2011, right before it experienced an eight-year stretch of growth that propelled the company to its current place at the top of the on-demand streaming market.
Tesla currently trades at or near the $180 level, which corresponds to roughly half of the company’s peak of $385 last year. While this might feel alarming, it should be noted that Netflix’s investors experienced something far more harrowing back in 2011, when the company’s shares saw a full 80% stock decline. After a price increase and CEO Reed Hastings’ announcement that Netflix will be separating its streaming and DVD-by-mail business, the company saw a loss of 800,000 subscribers in a single quarter. That was a time when the company only had 24 million subscribers as well.
At the core of Netflix’s decision then was its sincere belief that online streaming services are the future of on-demand entertainment. They also believed in their pricing power. Eddie Yoon, a think tank and advisory firm founder, noted that Netflix’s high-stakes bets paid off. Since that 80% decline back in 2011, the company has increased its user base to 60 million in the US and 150 million worldwide. Netflix stock had also increased 39 times than its low point back in 2011.
Tesla is in a similar boat. Just like Netflix in 2011, the electric car maker is dealing with the fallout of a quarter that rendered lower-than-expected numbers, which, together with several factors, has caused the company to post a loss after two profitable quarters. Nevertheless, Tesla is making a big bet on its belief that the demand for electric vehicles will grow exponentially over the next few years. So far, the company seems to be right on the money in this sense, as EV sales across the globe are increasing. In 2018 alone, electric car sales accounted for 2% of total new vehicles sold in the US. A study by AAA also noted that 20% of Americans want to own an electric car.
Yoon notes that if there is anything that Tesla could learn from Netflix, it would be to improve its communication. During Netflix’s steep drop in 2011, the company performed subpar when it came to communicating with its user base. This was true during times when Netflix would change its pricing, or if it would change aspects of its business. Tesla is quite around the same boat. Its pricing power is strong, and contrary to Bernstein’s recent note, Tesla’s brand holds a lot of value for an increasing number of customers. Despite this, the electric car maker still has notable areas of improvement when it comes to communication, partly evidenced by the misinformation surrounding the company today. If Tesla can refine this, then the company’s potential recovery would likely be smoother than expected.
The recent comparisons of Tesla to Netflix in 2011 appear to have been triggered by rumors that an investor who took a particular interest in the streaming giant at its lowest point. These rumors were recently related by Will Meade, a former PM at Goldman Sachs and a former editor at Forbes. “Rumor swirling that a big activist has taken a stake in Tesla $TSLA and he/she said it reminds them of $NFLX in 2011. Explains the almost $3 million of $TSLA Aug $250 calls swept right at the open. Could it be Icahn!” he wrote, referring to billionaire investor Carl Celian Icahn.
As of writing, Tesla stock is trading at 5.20% at $188.42 per share.
Tesla has scheduled its Earnings Call for Q4 and Full Year 2025 for next Wednesday, January 28, at 5:30 p.m. EST, and investors are already preparing to get some answers from executives regarding a wide variety of topics.
The company accepts several questions from retail investors through the platform Say, which then allows shareholders to vote on the best questions.
Tesla does not answer anything regarding future product releases, but they are willing to shed light on current timelines, progress of certain projects, and other plans.
There are five questions that range over a variety of topics, including SpaceX, Full Self-Driving, Robotaxi, and Optimus, which are currently in the lead to be asked and potentially answered by Elon Musk and other Tesla executives:
- You once said: Loyalty deserves loyalty. Will long-term Tesla shareholders still be prioritized if SpaceX does an IPO?
- Our Take – With a lot of speculation regarding an incoming SpaceX IPO, Tesla investors, especially long-term ones, should be able to benefit from an early opportunity to purchase shares. This has been discussed endlessly over the past year, and we must be getting close to it.
- When is FSD going to be 100% unsupervised?
- Our Take – Musk said today that this is essentially a solved problem, and it could be available in the U.S. by the end of this year.
- What is the current bottleneck to increase Robotaxi deployment & personal use unsupervised FSD? The safety/performance of the most recent models or people to monitor robots, robotaxis, in-car, or remotely? Or something else?
- Our Take – The bottleneck seems to be based on data, which Musk said Tesla needs 10 billion miles of data to achieve unsupervised FSD. Once that happens, regulatory issues will be what hold things up from moving forward.
- Regarding Optimus, could you share the current number of units deployed in Tesla factories and actively performing production tasks? What specific roles or operations are they handling, and how has their integration impacted factory efficiency or output?
- Our Take – Optimus is going to have a larger role in factories moving forward, and later this year, they will have larger responsibilities.
- Can you please tie purchased FSD to our owner accounts vs. locked to the car? This will help us enjoy it in any Tesla we drive/buy and reward us for hanging in so long, some of us since 2017.
- Our Take – This is a good one and should get us some additional information on the FSD transfer plans and Subscription-only model that Tesla will adopt soon.
Tesla will have its Earnings Call on Wednesday, January 28.
Elon Musk
Tesla locks in Elon Musk’s top problem solver as it enters its most ambitious era
The generous equity award was disclosed by the electric vehicle maker in a recent regulatory filing.
Tesla has granted Senior Vice President of Automotive Tom Zhu more than 520,000 stock options, tying a significant portion of his compensation to the company’s long-term performance.
The generous equity award was disclosed by the electric vehicle maker in a recent regulatory filing.
Tesla secures top talent
According to a Form 4 filing with the U.S. Securities and Exchange Commission, Tom Zhu received 520,021 stock options with an exercise price of $435.80 per share. Since the award will not fully vest until March 5, 2031, Zhu must remain at Tesla for more than five years to realize the award’s full benefit.
Considering that Tesla shares are currently trading at around the $445 to $450 per share level, Zhu will really only see gains in his equity award if Tesla’s stock price sees a notable rise over the years, as noted in a Sina Finance report.
Still, even at today’s prices, Zhu’s stock award is already worth over $230 million. If Tesla reaches the market cap targets set forth in Elon Musk’s 2025 CEO Performance Award, Zhu would become a billionaire from this equity award alone.
Tesla’s problem solver
Zhu joined Tesla in April 2014 and initially led the company’s Supercharger rollout in China. Later that year, he assumed the leadership of Tesla’s China business, where he played a central role in Tesla’s localization efforts, including expanding retail and service networks, and later, overseeing the development of Gigafactory Shanghai.
Zhu’s efforts helped transform China into one of Tesla’s most important markets and production hubs. In 2023, Tesla promoted Zhu to Senior Vice President of Automotive, placing him among the company’s core global executives and expanding his influence beyond China. He has since garnered a reputation as the company’s problem solver, being tapped by Elon Musk to help ramp Giga Texas’s vehicle production.
With this in mind, Tesla’s recent filing seems to suggest that the company is locking in its top talent as it enters its newest, most ambitious era to date. As could be seen in the targets of Elon Musk’s 2025 pay package, Tesla is now aiming to be the world’s largest company by market cap, and it is aiming to achieve production levels that are unheard of. Zhu’s talents would definitely be of use in this stage of the company’s growth.
Tesla analyst Andrew Percoco of Morgan Stanley teased the company’s dominance in its self-driving initiative, stating that its lead over competitors is “not even close.”
Percoco recently overtook coverage of Tesla stock from Adam Jonas, who had covered the company at Morgan Stanley for years. Percoco is handling Tesla now that Jonas is covering embodied AI stocks and no longer automotive.
His first move after grabbing coverage was to adjust the price target from $410 to $425, as well as the rating from ‘Overweight’ to ‘Equal Weight.’
Percoco’s new note regarding Tesla highlights the company’s extensive lead in self-driving and autonomy projects, something that it has plenty of competition in, but has established its prowess over the past few years.
He writes:
“It’s not even close. Tesla continues to lead in autonomous driving, even as Nvidia rolls out new technology aimed at helping other automakers build driverless systems.”
Percoco’s main point regarding Tesla’s advantage is the company’s ability to collect large amounts of training data through its massive fleet, as millions of cars are driving throughout the world and gathering millions of miles of vehicle behavior on the road.
This is the main point that Percoco makes regarding Tesla’s lead in the entire autonomy sector: data is King, and Tesla has the most of it.
One big story that has hit the news over the past week is that of NVIDIA and its own self-driving suite, called Alpamayo. NVIDIA launched this open-source AI program last week, but it differs from Tesla’s in a significant fashion, especially from a hardware perspective, as it plans to use a combination of LiDAR, Radar, and Vision (Cameras) to operate.
Percoco said that NVIDIA’s announcement does not impact Morgan Stanley’s long-term opinions on Tesla and its strength or prowess in self-driving.
NVIDIA CEO Jensen Huang commends Tesla’s Elon Musk for early belief
And, for what it’s worth, NVIDIA CEO Jensen Huang even said some remarkable things about Tesla following the launch of Alpamayo:
“I think the Tesla stack is the most advanced autonomous vehicle stack in the world. I’m fairly certain they were already using end-to-end AI. Whether their AI did reasoning or not is somewhat secondary to that first part.”
Percoco reiterated both the $425 price target and the ‘Equal Weight’ rating on Tesla shares.
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