Tesla (TSLA) Stock: A Risky Bet on Future Promises? - InvestingChannel

Tesla (TSLA) Stock: A Risky Bet on Future Promises?

We recently published a list of Top 10 Trending AI Stocks to Watch in November. In this article, we are going to take a look at where Tesla Inc (NASDAQ:TSLA) stands against other trending AI stocks to watch in November.

Amid soaring valuations of AI stocks, beginner investors keep wondering whether they are too late to the AI party. However, investing experts believe that opportunities abound in the AI space because of the nature of this technological revolution.

While talking to Wall Street Journal during the WSJ Tech Live Conference, venture capitalist Martin Casado, a general partner at Andreessen Horowitz, explained why he believes there is no such thing as “too late” when it comes to AI for now.

“When it comes to AI, it really feels like the marginal cost of language, reasoning and creation are going to zero. And if that’s the case, this is a supercycle. And if that’s the case, we’ve got decades. So there’s no “too late.” In that sense, we’re still very, very early.”

The AI revolution is quickly entering the phase where we are seeing real-life use cases as AI is helping companies significantly reduce costs and increase efficiency. According to a detailed report published by Benesch’s AI Commission, an AI-based tool that monitors real-time data from electronic medical records reduced unexpected deaths in hospitalized internal medicine patients by 26%.

Casado also talked about the usability of AI models for actual problem-solving:

“Everybody looks at the OpenAIs. But as far as value creation and integration, if you look at all the private companies, the smaller companies that are building their own smaller models, they are some of the fastest-growing companies we’ve seen in the history of the industry.”

Also Read 10 Best Healthcare Stocks to Buy According to Hedge Funds and 10 Best Mid-Cap Healthcare Stocks to Buy Now.

For this article we picked 10 AI stocks trending on latest news and earnings. With each stock we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Best EV Stocks Under $50

Tesla Inc (NASDAQ:TSLA)

Number of Hedge Fund Investors: 85

Gene Munster of Deepwater Asset Management recently said the following about Tesla, Inc. (NASDAQ:TSLA) during a program on CNBC:

“In the near term, the setup was all about timing, and Elon talked about two years before we see this. You make the adjustment, it is three-plus years away. Also, they didn’t talk about that all-important, more affordable Model 2. I think most people had expected that.

On the timing of the Cyber Cab, the fact that it is two years out—you have to figure it’s three years. Basically, an investor who is new or a near-term Tesla Inc (NASDAQ:TSLA) investor really can’t bank on anything that’s RoboCab-related if you put a two-year time window on that. That was a disappointment. Second, the silence was deafening around them not talking about Model 2. My sense from being at the event and talking to people there is that the car is still clearly in the works. Timing on it is probably late ’25. Elon said it could be as early as this year, but call it late ’25.”

The Tesla Inc (NASDAQ:TSLA) event was indeed short on details. Notably absent was the discussion of a “more affordable” model that Musk had previously mentioned to boost confidence in Tesla’s vehicle sales growth outlook.

What about the $30,000 price tag claim?

Musk has indicated that the Cybercab will have a production cost of approximately $30,000. Operating within the robotaxi fleet is projected to cost around $0.20 per mile. With a production cost of $30,000, the retail price of the Cybercab is likely to exceed this figure. For instance, if the Cybercab is priced at $30,000 per unit, that translates to $15,000 per seat. In contrast, the average price per passenger seat in Tesla Inc (NASDAQ:TSLA)’s most affordable long-range RWD Model 3—factoring in full self-driving (FSD) licensing—is under $10,000 ($29,990 post-incentive vehicle price plus $8,000 for the FSD license, divided by four passenger seats). Regarding operational costs, while the Cybercab is expected to cost $0.20 per mile, charging the Model 3 is estimated at under $0.10 per mile, leaving a significant margin to cover maintenance and downtime.

There is a lot of hype around Tesla Inc (NASDAQ:TSLA) robo taxis but many believe they will not be enough to fix the company’s long-term challenges.

What are these challenges?

Tesla Inc (NASDAQ:TSLA) product lineup is showing signs of stagnation, with over 95% of sales still coming from the Model 3 and Model Y. Meanwhile, competitors are rolling out more advanced models. Even Rivian’s CEO suggested Tesla Inc (NASDAQ:TSLA) could be nearing market saturation for these models. According to Reuters, Tesla’s market share in Europe is slipping as legacy automakers like BMW post stronger sales. Chinese competitor BYD is also gaining ground in Europe, despite talk of tariffs.

ClearBridge Small Cap Value Strategy stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q2 2024 investor letter:

“The strength in the stock market adds significantly to that enormous transfer of wealth, which one could argue is good for shareholders. But is it causal? That is, did the stock market do well because CEOs got large stock grants? Are the CEOs just the lucky recipients of a windfall when the market goes up and their employees perform well? Or do they require huge grants to do their jobs that no one else could possibly do as effectively?

Tesla, Inc. (NASDAQ:TSLA), and most of its shareholders, certainly think the latter is true. In 2018, Tesla’s board of directors crafted a pay package for CEO Elon Musk that would award him 12 tranches of 10-year, fixed-price options on 1% of company stock for every $50 billion in market cap the stock added. In total, the options would be for 304 million shares of the company at $23.34 a share. He would receive no other compensation, until or unless the board decided otherwise. Shareholders approved that pay package, and the stock added all that market cap and more, giving Musk the right to buy 10% of the company for $50 billion less than it was worth, adding to his existing 13% stake. Minority shareholders sued, and a court sided with them and expunged the package in January 2024. “The process leading to the approval of Musk’s compensation plan was deeply flawed,” ruled Judge Kathaleen McCormik of the Delaware Court of Chancery as part of a 200-page decision. It seemed like a long-awaited check on excessive compensation to one individual for the achievements of an entire company….” (Click here to read the full article)

Overall, TSLA ranks 10th on our list of trending AI stocks to watch in November. While we acknowledge the potential of TSLA, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TSLA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock

Disclosure: None. This article is originally published at Insider Monkey.

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