Investor's Corner
Venture capitalist explains how Tesla critics missed the big picture on TSLA
On the heels of a profitable Q2 2020 earnings report, Tesla (NASDAQ:TSLA) bulls and bears remain locked in battle over the electric car maker’s second quarter results. Tesla bulls are celebrating the company’s first profitable year, while bears are pointing out that the electric car maker was only able to accomplish such a feat due to regulatory credits. For venture capitalist Chamath Palihapitiya, the TSLA bull vs bear debate has been an example of long term thinking against balance sheet mathematics.
Chamath, an early investor in Facebook who is estimated to be worth about $1.2 billion today, was recently featured in CNBC’s Squawk Box. During his segment, the venture capitalist explained that there is an emerging trend today among Wall Street analysts and retail investors, since the latter now have access to so much information. The result of this, according to Chamath, was that the quality of retail investors’ analysis has gotten a lot better, to the point where it could be on parity or even better than Wall Street’s.
“I think this is a really important example of much bigger trend that’s happening in the stock market, which is that retail investors now have access to so much information that it’s almost on parity with people that work in traditional investment organizations. And what we’ve seen as that happened, is that the quality of that analysis and the ability to see around the corner is as good and in many cases, better than traditional investment firms in the way they view the problem,” he said.
Responding to inquiries about Tesla bears’ arguments about the company’s regulatory credits, the venture capitalist explained that TSLA critics have so far been playing balance sheet mathematics. This, unfortunately, has led them towards massive losses, something that Tesla short sellers have suffered from in recent months. Apart from this, Chamath added that ultimately, it should be noted that the Tesla story is not only about cars anymore. He added that this will only get more prominent as the industry shifts further into electrification. In short, Tesla’s milestone in Q2 was not an ultimate victory for the company — it is only the beginning.
“So from Day 1, you’ve had this massive tension between the bulls and the bears on this company, and the bulls, basically saw a long term trend around electrification, and the bears tried to play with balance sheet mathematics. Of course, if I said ‘You can sell 90,000 cars, but then if you negative sell 100,000, then you’ve not sold 10,000.’ And you would say, ‘What does any of this mean?’ You can use any convoluted logic to try to be short this stock, and what you would have done is just lost an enormous amount of money.
“And so, what we’re gonna see now is that the stock will be part of the S&P 500. It is the leading edge when it comes to electrification and decarbonization, and here’s something, what the bulls would get right and what the bears will ignore from here is that this is no longer about cars. That that’s the first wave of growth, and I think people are pricing in an evisceration of traditional autos and an enormous shift to EVs, of which Tesla will get the disproportionate share,” he said.
Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.
Tesla (NASDAQ: TSLA) is being called “the biggest meme stock we’ve ever seen” by Yale School of Management Senior Associate Dean Jeff Sonnenfeld, who made the comments in a recent interview with CNBC.
Sonnenfeld’s comments echo those of many of the company’s skeptics, who argue that its price-to-earnings ratio is far too high when compared to other companies also in the tech industry. Tesla is often compared to companies like Apple, Nvidia, and Microsoft when these types of discussions come up.
Fundamentally, yes, Tesla does trade at a P/E level that is significantly above that of any comparable company.
However, it is worth mentioning that Tesla is not traded like a typical company, either.
Here’s what Sonnenfeld said regarding Tesla:
“This is the biggest meme stock we’ve ever seen. Even at its peak, Amazon was nowhere near this level. The PE on this, well above 200, is just crazy. When you’ve got stocks like Nvidia, the price-earnings ratio is around 25 or 30, and Apple is maybe 35 or 36, Microsoft around the same. I mean, this is way out of line to be at a 220 PE. It’s crazy, and they’ve, I think, put a little too much emphasis on the magic wand of Musk.”
Many analysts have admitted in the past that they believe Tesla is an untraditional stock in the sense that many analysts trade it based on narrative and not fundamentals. Ryan Brinkman of J.P. Morgan once said:
“Tesla shares continue to strike us as having become completely divorced from the fundamentals.”
Dan Nathan, another notorious skeptic of Tesla shares, recently turned bullish on the stock because of “technicals and sentiment.” He said just last week:
“I think from a trading perspective, it looks very interesting.”
Nathan said Tesla shares show signs of strength moving forward, including holding its 200-day moving average and holding against current resistance levels.
Sonnenfeld’s synopsis of Tesla shares points out that there might be “a little too much emphasis on the magic wand of Musk.”
Elon Musk just bought $1 billion in Tesla stock, his biggest purchase ever
This could refer to different things: perhaps his recent $1 billion stock buy, which sent the stock skyrocketing, or the fact that many Tesla investors are fans and owners who do not buy and sell on numbers, but rather on news that Musk might report himself.
Tesla is trading around $423.76 at the time of publication, as of 3:25 p.m. on the East Coast.
Elon Musk
Elon Musk affirms Tesla commitment and grueling work schedule: “Daddy is very much home”
The remarks came as Tesla shares crossed the $400 mark on the stock market.
Tesla CEO Elon Musk reiterated his commitment to the electric vehicle maker and its future projects this week, responding to speculation following his $1 billion purchase of TSLA stock.
The remarks came as Tesla shares crossed the $400 mark on the stock market, extending a rally fueled in part by Musk’s TSLA purchase.
Elon Musk’s nonstop work schedule
Amidst the reaction of TSLA stock to Musk’s $1 billion investment, Tesla owners such as @greggertruck noted that “Daddy’s home.” Musk replied, stating that “Daddy is very much home.” He then shared details of a packed weekend of work, which was definitely grueling but completely within character for a “wartime CEO.”
Musk did note, however, that he had lunch with his kids during the weekend despite his extremely busy schedule.
“Daddy is very much home. Am burning the midnight oil with Optimus engineering on Friday night, then redeye overnight to Austin arriving 5am, wake up to have lunch with my kids and then spend all Saturday afternoon in deep technical reviews for the Tesla AI5 chip design.
“Fly to Colossus II on Monday to walk the whole datacenter floor, review transformers and power production (excellent progress), depart midnight. Then up to 12 hours of back-to-back meetings across all Tesla departments, but with a particular focus on AI/Autopilot, Optimus production plans, and vehicle production/delivery,” Musk wrote in his post.
Wartime CEO
Wedbush analyst Dan Ives described Musk as operating in “wartime CEO mode,” highlighting autonomous driving and AI as a trillion-dollar market opportunity for Tesla. Musk reiterated this point late last month as well, when he outlined the several projects he is juggling among his numerous companies. At the time, Musk stated that he was busy with Starship 10, Grok 5, and Tesla V14. This was despite his notable presence on X.
With Tesla Master Plan Part IV being partly released, the company is entering what could very well be its most ambitious stage to date. To usher in an era of sustainable abundance, Tesla would definitely require a “wartime CEO,” someone who could remain locked in and determined to push through any obstacles to ensure that the company achieves its goals.
Elon Musk
Tesla analyst says Musk stock buy should send this signal to investors
“With Musk’s (Tesla stock) purchase, combined with the upward momentum for delivery expectations and robotaxi rollout, we are becoming more bullish.”
Tesla CEO Elon Musk purchased roughly $1 billion in Tesla shares on Friday, and analysts are now breaking down the move as the stock is headed upward.
One of them is William Blair analyst Jed Dorsheimer, who said in a new note to investors on Monday that Musk’s move should send a signal of confidence to stock buyers, especially considering the company’s numerous catalysts that currently exist.
Elon Musk just bought $1 billion in Tesla stock, his biggest purchase ever
Dorsheimer said in the note:
“With Musk’s (Tesla stock) purchase, combined with the upward momentum for delivery expectations and robotaxi rollout, we are becoming more bullish. This purchase is Musk’s first buy since 2020. To us, this sends a strong signal of confidence in the most important part of Tesla’s future business, robotaxi.”
Musk putting an additional $1 billion back into the company in the form of more stock ownership is obviously a huge vote of confidence.
He knows more than anyone about the progress Tesla has made and is making on the Robotaxi platform, as well as the company’s ongoing efforts to solve vehicle autonomy. If he’s buying stock, it is more than likely a good sign.
Tesla has continued to expand its Robotaxi platform in a number of ways. The project has gotten bigger in terms of service area, vehicle fleet, and testing population. Tesla has also recently received a permit to test in Nevada, unlocking the potential to expand into a brand-new state for the company.
In the note, Dorsheimer also touched on Musk’s recent pay package, revealing that William Blair recently met with Tesla’s Board of Directors, who gave the firm some more color on the situation:
“We recently participated in a meeting with Tesla’s board of directors to discuss the details of Musk’s performance package. The board is confident of its position in the Delaware case and anticipates a verdict by end of year. It does not expect a similar situation to occur under new Texas jurisdiction. Musk has the board’s full support, and we expect he’ll get more than enough shareholder support for this to pass with flying colors.”
Tesla stock is up over 6 percent so far today, trading at $421.50 at the time of publication.
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