Investor's Corner
Tesla Shorts come out just in time for Summer
Tesla (NASDAQ: TSLA) shorts are coming out, and their vocal stances against the electric automaker are just in time for Summer. Temperatures are rising, so naturally, the shorts are appearing from thin air, just as Tesla’s momentum is building to finish out the second quarter of 2020.
The market will always have those looking to capitalize on a successful company’s downfall. The problem is, Tesla is not experiencing a downfall, nor is it experiencing any issues that really have to do with the automaker’s integrity as a company. Tesla is experiencing some critiques with some problems within the vehicle’s touchscreens, and some subjective opinions regarding build quality, but is that really enough to derail the momentum that the company has compounded over the past 6 months?
In my opinion, no.
However, there are a series of financial analysts who claim that TSLA is going to fall from grace, and its $1,000 stock price, which fluctuates day-to-day, will be a short-lived phenomenon that cannot hold. The analysts claim that Tesla is merely another hot car company with a fun business model and new technology, and that’s what is making it successful. However, these analysts fail to realize that Tesla is much bigger than just a company that builds sustainable cars. It is an entire tech business, focused on vehicles, energy, and sustainability, and the $1,000 stock price it holds is wholly justified.
A name that may be familiar to the TSLA stockholders is Adam Jonas. The Morgan Stanley analyst has been a notorious TSLA critic, who has continued to revise his price targets and ratings for the stock. Jonas’ current stock advice for TSLA is a $650 PT with a “Sell” position.
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While Jonas does recognize Tesla as a “tech” company and not just an automaker, his most recent note to investors indicated that the company holds a series of increased risks because “proven/mature companies” have a lesser degree of execution risk.
It is pretty interesting to hear someone who follows Tesla firmly suggest that the company isn’t proven. The automotive side of Tesla may be young with only twelve years of car sales, but it’s more than proven because everything that Elon Musk has said has become a reality.
It goes all the way back to Tesla’s Master Plan. Make an expensive car, use that money to build a cheaper car, and then use that money to create an even cheaper car.
2008 Roadster > Tesla Model S/X > Tesla Model 3
It is all right there. We could break it down further by talking about Elon Musk’s goal of building world-class automobiles that operate in an environmentally-friendly fashion that aren’t “slow and boring” as he once referred to previous battery-powered machines.
It is more than proven that Tesla is reliable, or mature, even though its a young company. It has repeatedly dug itself out of holes, built upon weaknesses, and risen from the dead in times where it really seemed like things wouldn’t pick back up. For a refresher, watch a documentary called “Revenge of the Electric Car.”
Another analyst is Gordon Johnson, the founder of GLJ Research. In an interview with Benzinga, Johnson talked about his stance on TSLA, which he said, “couldn’t be more bearish.”
Johnson points to Tesla’s lineup of vehicles as the indicator of why he feels the company isn’t an excellent pick for investing.
“Initially it was the S and the X that were going to dominate in the luxury market. That didn’t happen. Then it was going to be the Model 3, which was their mass-market car, which took them to profitability. That didn’t happen. Then it was the Model Y, right? They won’t even tell you what orders are on the Model Y.”
Tesla is coming off of three straight profitable quarters. Q3 and Q4 2019 were both profitable, and Q1 2020 was the first time in company history that the company was profitable in the first three months of the year. The Model Y didn’t begin deliveries until March, so the Model 3, while it did have some non-profitable quarters, led the company to three straight profits over the last three quarters.
As far as the S and X, electric cars were somewhat taboo when both of those vehicles were released. It wasn’t a huge market like it is today, and it was Tesla’s first real attempt at creating an everyday car. While I think Johnson has a point, the S and the X still manage to be a central part of Tesla’s fleet today, constantly receiving updates for performance and battery tech through software upgrades.
But Johnson turned his sights onto the Cybertruck. Claiming the $50 deposit (which is actually $100) is just a ploy to obtain high preorder numbers, he doesn’t even think the car is street legal. This is interesting considering it has traveled on public roads several times, and the IIHS is considering a “no side mirrors” law that would allow the Cybertruck to keep its current design.
Then Johnson mentioned the Semi. “It’s almost like the Tesla Semi,” he said, comparing the commercial vehicle to the Cybertruck. “…Where they were taking preorders for $100,000 three years ago, and they still haven’t made the car.”
The issue with this is, the Semi has always been in the plans. Yes, it wasn’t in production, but it is about to begin its first volume phase in Fremont. The issue was battery production shortages, which evidently no longer seem to be an issue because of Musk’s indication regarding the Semi’s imminent production. It isn’t like Tesla would keep the money from preorders if they scrapped the Semi plans.
Analysts are entitled to their opinions, of course. But there needs to be more education regarding their decisions, in my opinion. There is a lot of proof that Tesla is doing a lot of great things, and it starts with recognizing the mission that the company has set out to achieve. No automaker is perfect, and Tesla never claimed to be. It has had its problems just like any other car company, and it will work through them. Touchscreens fail, batteries need a replacement, tires need patching every now and again. But these issues aren’t exclusive to Tesla, they happen to every manufacturer’s cars at some point or another.
Temperatures are rising, the A/C is cranked up, and the Shorts are out. It’s Summertime, ladies, and gentlemen.
Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.
Wedbush Securities is initiating stock coverage on SpaceX (NASDAQ: SPCX), marking the first comments on the company since it went public several weeks ago. Wedbush and its analyst handling coverage, Dan Ives, are widely bullish on fellow Musk company Tesla (NASDAQ: TSLA).
Ives wrote his first note initiating coverage of SpaceX shares on Wednesday with a $190 price target and an ‘Outperform’ rating. The firm believes the company is well positioned off of its IPO because of its wide array of projects, including AI compute power and infrastructure, connectivity projects, and launches.
“We view SpaceX as one of the most differentiated assets within the tech market with a strong footprint across its three core markets, with Starlink driving success with connectivity,” Ives wrote, “Starship launches leading to a demand flywheel and increasing deal flow for its Colossus clusters.”
Elon Musk called it Epic: The full story of SpaceX’s Starship Flight 12
Wedbush leans heavily on Starlink, which they say is the “profitability driver given the strength of its recurring revenue base of ~12 million subscribers as of June 5th.” Ives believes Starlink is still in the “early innings” of penetrating the global telecommunications and broadband market, as it only holds less than a 1 percent share. However, this number is sure to increase over time.
It also highlights the importance of Starship, which it says is an “essential layer” of SpaceX’s overall success. SpaceX developing and displaying the ability to reuse rockets is a major cost and reliability advantage “as it reduces the necessary hardware launch costs while generating a feedback loop for future flights to improve their launch flight rate without accelerating capex spend.”
Finally, SpaceX’s recent AI/Compute projects are also very elementary, Ives writes. It is worth mentioning Wedbush said its $190 price target is derived from a valuation forecast that sees the company yielding roughly $2.48 trillion of implied enterprise value.
There are also some factors that Wedbush did not take into account with its initial coverage. The firm wrote in the note:
“We note that there is optional value coming from Starship’s accelerating scale towards sub-$200/kg unit economics, orbital data centers, and enterprise AI monetization as these factors could drive meaningful upside but these face major hurdles, so we do not take that into account with our valuation.”
SpaceX shares are down just over 2 percent today, trading at around $167 at the time of publication.
For years, there have been images and videos across social media platforms that have reminded me of when I was a 15-year-old kid teased by “Xbox 720” videos on YouTube. These videos are of the supposed “Tesla Phone” that Elon Musk was secretly developing in between leading Tesla with its electric cars and SpaceX with its reusable rockets.
Would you buy a Tesla phone ? pic.twitter.com/aaTwvvIJit
— Tesla Owners Silicon Valley (@teslaownersSV) October 6, 2023
Although Musk has put those rumors to bed several times, it was never completely out of the realm that he could get involved in cell phones in some capacity. Think outside the box and more macro-level, though. Instead of reinventing the computer, Musk reinvented connectivity by developing Starlink with SpaceX.
It could be something similar, TD Cowen analyst Gregory Williams said in a note last week, where he hinted SpaceX could be gathering some steam to acquire T-Mobile.
Williams said it would be the “clear choice” for SpaceX if it decided to go through with a network acquisition. He also suggested AT&T.
The move would be possible through selling more of its own stock, which would help SpaceX raise the money to purchase T-Mobile, which would cost roughly $300 billion. It could be one of the moves SpaceX makes post-IPO in terms of an acquisition: it already acquired Cursor AI for $60 billion.
Other analysts, like Dan Ives of Wedbush, believe SpaceX and Tesla will eventually merge into one anyway, and that conglomeration could come as soon as this year, some have said.
The implications of SpaceX purchasing T-Mobile are massive. A combined entity would create a truly ubiquitous network: T-Mobile’s terrestrial 5G towers and Starlink’s growing constellation of Direct-to-Cell satellites. This would essentially eliminate dead zones across the U.S. and potentially globally.
SpaceX would instantly become a full-scale facilities-based carrier with satellite differentiation; a huge advantage. This would pressure AT&T and Verizon heavily.
There are also concerns like a potential reduction in long-term competition, and of course, a deal of that size would face intense scrutiny from government agencies.
The strategic fit is compelling due to the existing Starlink–T-Mobile partnership and complementary technologies (space + terrestrial). It could create a dominant integrated communications player. However, the regulatory, financial, and execution hurdles are enormous — this remains highly speculative with no indication SpaceX is actively pursuing it right now.
Elon Musk
SpaceX’s newest Starmind will make earth data centers obsolete
Elon Musk confirmed Starmind as SpaceX’s AI satellite constellation name, targeting one million orbital compute nodes.
Elon Musk confirmed that Starmind will be the official name of SpaceX’s planned AI satellite constellation, following a trademark filing by xAI that surfaced earlier this week. Starmind is what’s being described to the FCC as a constellation of up to one million AI satellites
It’s worth noting that SpaceX’s Starlink communication satellite and Starmind are built on the same orbital infrastructure concept but serve entirely different purposes. Starlink is a connectivity network, with satellites receiving and relaying data between points on Earth, and functioning as a high-speed internet backbone in space. The satellites themselves do not process or think, and move information from one place to another, the same function a fiber cable performs underground.
SpaceX just forced Verizon, AT&T and T-Mobile to team up for the first time in history
Starmind, on the other hand, is something completely different, and tather than moving data, its satellites would compute data through artificial intelligence and directly in orbit using onboard processors powered by large solar arrays. Where a Starlink satellite is essentially a very fast pipe, a Starmind satellite is a server. The practical implication is that Starmind would allow AI models to run inference, process queries, and generate outputs from space, then beam results down to users anywhere on Earth within milliseconds, and without the data ever needing to travel to a terrestrial data center.
Starship will be able to carry 30 to 50 AI1 satellites per launch, delivering the equivalent of dozens of server racks per flight, with no land acquisition, no power grid approval, and no cooling infrastructure required on the ground.
SpaceX is pursuing this new technology as terrestrial data centers are running into hard limits such as lack of physical space, community opposition, and power and water consumption at a scale that is increasingly difficult to permit. Space has unlimited solar power, natural vacuum cooling, and no zoning boards. Musk said in a June 8 video presentation that he expects space to become the lowest-cost location to deploy AI compute within two to three years. Two AI1 prototypes are scheduled to launch in early 2027, with volume production targeted for the end of that year at a new facility called Gigasat.
The real world applications Starmind enables extend well beyond powering Grok. A constellation of orbiting AI processors could run inference workloads for any paying customer, anywhere on Earth, with latency measured in milliseconds rather than the seconds associated with ground-based cloud routing across continents. Starmind, if it scales as described, would make SpaceX the landlord of AI compute the same way Starlink made it the landlord of satellite internet.
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