Tesla’s Strategic Diversification
A bull on Tesla, Inc.’s stock has advised investors to temper expectations concerning the upcoming Robotaxi Day event while reiterating Tesla as a top pick in the auto industry. Despite challenges within the core electric-vehicle manufacturing business due to an industry-wide downturn, the company has strategically expanded into ancillary sectors, earning accolades from analyst Adam Jonas at Morgan Stanley.
Analyst Endorses Tesla
Adam Jonas underscored Tesla’s diversification strategy, commending the company for taking proactive measures to mitigate risks to its core auto business. He praised Tesla for its initiative in reallocating resources to areas such as stationary energy, compute infrastructure, robotics, and other forms of AI representation. Jonas maintained an Overweight rating and set a $310 price target for Tesla shares.
Urgent Need for Cost Control
Tesla’s stock has experienced a significant drop of over 50% from its all-time highs, notably underperforming compared to tech giants over the past three years. Jonas highlighted the importance of reigning in costs amidst a 50% reduction in consensus estimates over the past year. The analyst emphasized the necessity of Tesla showcasing disciplined cost management to enhance investor confidence and align its business model with the evolving AI landscape.
Source: Benzinga Pro
Challenges Affecting Margins
Despite Tesla’s projected 2024 GAAP operating profit of $5.6 billion, Jonas indicated that after factoring in zero-emission vehicle credits and Tesla Energy operating profit estimates, the core auto operating profit stands at $2.2 billion. This could imply that the auto business operated at a loss in 2024, with much of the profit stemming from dealer margins and recurring revenue channels such as connectivity and software services.
Jonas noted that a significant portion of Tesla’s operating expenses are non-auto related, including investments in AI infrastructure.
Rationalizing Expectations for Robotaxi Day
Looking ahead to Tesla’s Robotaxi Day event scheduled for October 10, Jonas urged caution, forecasting a demonstration of the latest Full Self-Driving technology and a presentation featuring a fully autonomous ‘cyber-cab.’ Despite the excitement, he emphasized that the event will primarily take place in controlled environments.
Notably, Tesla currently possesses a permit for autonomous vehicle testing with a driver but lacks the authorization for testing or deploying autonomous vehicles without a driver.
Pre-market trading on Friday saw Tesla’s stock decline by 0.84% to $228.24, based on data from Benzinga Pro.
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