Elon Musk Thinks There’s a Real Reason to Own Tesla Stock: Morning Brief

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Tesla (TSLA) shares fell 12% on Wednesday after the company reported weaker-than-expected earnings and signaled slower growth in its traditional automotive business.

But for CEO Elon Musk, investors really only need to answer one question when it comes to assessing how much stocks are worth.

“Tesla’s value is overwhelmingly autonomy,” Musk said when asked on the company’s conference call Tuesday how the potential for fewer tax credits for electric vehicles could impact Tesla’s business. “These other things are in the noise regarding autonomy.”

Musk added that anyone who doesn’t believe the company will solve vehicle autonomy should “sell their Tesla shares.”

“If you believe Tesla will solve autonomy, you should buy Tesla stock,” Musk said. “And all these other issues are in the noise.”

On Tuesday, Tesla also announced that it will reveal plans for its long-awaited robotaxi on October 10, a two-month delay from initial August 8 plans. Elsewhere on the call, Musk approvingly cited Ark Invest research this said that the eventual market capitalization of the service would reach something in the trillions.

“At this point, I’m not sure what money means,” Musk said.

But in the short term, the money still means something, especially to investors who dumped the stock on Wednesday and to Wall Street analysts who questioned Musk’s idealistic tone on the company’s earnings call.

“We believe that any return from such initiatives is further away, so in the earnings updates, the reality of the business returns to (primarily) the automotive sector,” wrote Joseph Spak, an analyst at UBS Investment Bank, in a note to clients on Tuesday. fair.

Spak argues that the value of Tesla’s automotive and energy business means the stock is likely worth about $74 per share, or about a third of its current price.

But if stock valuations are a number today multiplied by a story about tomorrow, Musk has consistently chosen the most compelling – and interesting – story to tell investors.

A strategy that helps explain why Musk’s car company trades at a significant premium to any other company in the industry.

For Musk’s crowd of retail investors, the bolder the bet, the more enthusiastic the response. On Wall Street, analysts who fail to adequately integrate Musk’s vision into a financial model may struggle to keep pace.

The story continues

And even though autonomy presents investors with an “in or out” dilemma, the biggest opportunity for Tesla may even lie on another side of the business.

On Tuesday, Musk said that the potential total addressable market for Tesla’s Optimus robot, which has not yet reached the market, is one for every person on Earth (read: 8 billion). And even that might not be a big enough goal.

“I think the long-term value of Optimus will exceed that of everything else that Tesla [does] combined,” Musk said.

“I think everyone is going to want one. There are 8 billion people on Earth. So that’s 8 billion there. Then you have all the industrial uses, which are probably at least as many, if not a lot more. So I suspect the demand for long-term production of general-purpose humanoid robots exceeds 20 billion units.”

Anything less, to use Musk’s words, is just noise.

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