Ross Gerber Says Tesla (TSLA) Is ‘Almost Like a Meme Stock’ - InvestingChannel

Ross Gerber Says Tesla (TSLA) Is ‘Almost Like a Meme Stock’

We recently published a list of Wall Street Is Focusing on These 10 AI Stocks as New Year Begins. In this article, we are going to take a look at where Tesla, Inc. (NASDAQ:TSLA) stands against other stocks Wall Street is focusing on as the new year begins.

Dan Niles, Niles Investment Management founder, recently said in a program on CNBC that a slowdown in spending could be a “big problem” for major AI players in 2025. The analyst highlighted that when Satya Nadella was asked whether his company was facing a chip shortage, the head of the Redmond software giant said his company was facing a power shortage, not a chip shortage. Niles said this goes against the claims of Jensen Huang who has been pointing to unprecedented demand for AI chips.

“If you look at the Magnificent 7 (except one) …. they are trading at a low 30 PE. The S&P 500 is trading at a 25 PE, but if you look at the midcap and small-cap stocks, which people have forgotten about because they’re not really AI plays, they’re trading at around 19 to 20 times. They’ve underperformed up until sort of mid-year when the performance picked up. If you look at stocks since June 30th, basically, the S&P is up about 8%, but the NASDAQ 100 is only up 7%. The Russell 2000 is actually up 10% after being only up 1% for the first six months of the year. So you’re already starting to see this broadening out, and I think with the new administration really focused on domestic manufacturing, deregulation, etc., that’s going to benefit the small midcap names more so than names in the S&P 500,” Niles said.

Niles said stocks can face a “rough” time in the first quarter amid the changing posture of the Fed.

“The Fed finally admitted inflation wasn’t transitory. I think that might have been the wakeup call, which is why I think Q1 could be a really rough time for a lot of the, you know, the market as a whole, but a lot of the mega cap stocks as well. As we have to kind of price in the fact that the FED might, you know, they might pause or they might even raise next year, which I think that’s a 50/50 shot of whether they cut, raise, or hold.”

READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In

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Ross Gerber Says Tesla (TSLA) Is ‘Almost Like a Meme Stock’ Pixabay/Public Domain

Tesla, Inc. (NASDAQ:TSLA)

Number of Hedge Fund Investors: 99

In late December, Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management, said in a program on Schwab Network that while he still owns a stake in Tesla, Inc. (NASDAQ:TSLA), he has concerns about the stock’s valuation and risks.

“I’m an activist investor, and a lot of people perceive that I had like sold all my Tesla Inc (NASDAQ:TSLA) or this or that, which is not true. I sold about half or 40% of my Tesla position, but it was mostly as a rebalance and a valuation thing. And what’s happened in the last, you know, two months with, you know, Elon’s amazing support of Trump and then helping Trump win and now Elon’s president of the United States, it really has put, you know, Tesla Inc (NASDAQ:TSLA) in this new light that it’s almost like a meme stock now.

We’ve moved to all-time highs. The valuation makes no sense, but that’s okay. And, you know, we’ve made back—now Tesla Inc (NASDAQ:TSLA) back to our number two stock position behind Nvidia at my firm. And, you know, again, we’re trimming. We’re going to continue to take profits here because as much as I love the potential of Tesla Inc (NASDAQ:TSLA), I think there’s a lot of risks in the stock,” Gerber said.

Looking beyond the recent spike in Tesla shares amid Donald Trump’s victory, Tesla’s fundamentals are challenged. How? Tesla Inc’s (NASDAQ:TSLA) key robotaxi event was 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’s (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.

Delaware Ivy Core Equity Fund stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q3 2024 investor letter:

“Tesla, Inc. (NASDAQ:TSLA) – Though it isn’t a holding within the portfolio, Tesla continues to be a cult-like stock with weak fundamentals dependent on highly speculative development of autonomous driving technology. The company’s share price moved higher during the quarter after weakness in the year-to-date period.”

Overall, TSLA ranks 9th on our list of stocks Wall Street is focusing on as the new year begins. 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 time frame. 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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