Running with the (Tesla) Bulls
West Coast Stat Views (on Observational Epidemiology and more) 2025-03-27
Before diving into Wall Street attitudes toward Tesla, we have to remind ourselves that there are at least three different measures of success for a car company: sales, profitability, and stock price. With respect to the first two, Tesla has been, at best, marginally successful, largely due to various government loans and subsidies. With respect to the third, however, it has been absolutely phenomenal. That is always at least part of the context for the buy recommendations. This is a stock that has defied gravity for so long, and has burned so many short sellers, that it seems foolhardy to point out the fact that it has never justified the price people were paying for it.
Of course, analysts can't just come out and admit that this is the rationale for their recommendations. They have to come up with reasons that can at least slip by investors who are pre-inclined to buy anyway.
At the moment, with things looking ever darker for the company, the bull case mainly comes down to this from Jim Cramer:
Cramer's case is characteristically incoherent— they paid the man for his expressive skills, not his analytic ones. For a clearer presentation of the same basic ideas, you'll need to turn to Cantor Fitzgerald:
7 reasons to buy Tesla stock after 52% price crash: Cantor Fitzgerald
Analysts at Cantor Fitzgerald led by Andres Sheppard upgraded the stock to"Overweight" from "Neutral" in a note on Wednesday, arguing that the recent share price decline represented an "attractive entry point" for investors.
"We believe the recent selloff represents an attractive entry point for investors with >12-month investment horizon (and who are comfortable with volatility," Sheppard wrote.
He listed seven material catalysts that he sees boosting the stock in the long term. Those include:
- "The introduction of Robotaxi segment (June 2025)."
- "Rollout of FSD in China (started in 1Q25)." FSD refers to Tesla's Full Self-Driving software package, which costs $8,000 per vehicle.
- "Rollout of FSD in Europe (we expect 1H25 pending regulatory approval."
- "Introduction of lower-priced vehicle in 1H25 (we expect initial price of ~$30,000 inclusive of tax credit."
- "High volume production of Optimus Bot (2026)."
- "Initial deliveries of Optimus to customers (we expect 4Q26E/1H26)."
- "Introduction of Semi Truck." The firm said it expects the truck to start production in the second half of this year or early 2026.
Sheppard wrote that his bullishness on Tesla was crystallized after he visited the company's Gigafactory and AI data centers in Austin, Texas.
...
"Waymo's vehicles have reported >25M cumulative autonomous miles driven on public roadways as of 12/2024," the analyst wrote. "Tesla on the other hand, has reported >3B cumulative autonomous miles driven (on supervised Full Self Driving)."
Now this one we can have some fun with. Let's take them in order. As we go through these, remember that the company is priced so high that its profitability has to increase by something like an order of magnitude in the next 2 to 5 years to justify holding on to the stock, let alone buying more.
1. Despite wildly optimistic estimates, it is not at all clear how big the self-driving taxi market is going to be. What is clear is that Tesla is nowhere near being the leader in this field. Waymo, some Chinese competitors, and one or two other companies are well ahead. As for those supposed billions of miles of autonomous driving, this is another one of those cases where quality counts more than quantity. Waymo has far better data, including lidar. This means that the AI actually knows when that thing that looks like a white van in the fog is actually there.
2. FSD is similar to BYD's "God's Eye" with one important difference: BYD includes the system for free with all of its cars.
And while on the subject of Tesla's tech vs. BYD's... (From the LA Times Hiltzik)
Tesla’s reputation for cutting-edge technology is eroding; the company’s largest Chinese rival, BYD, just announced a new charging technology it says can add about 250 miles of range to an EV in five minutes — even less than the time it takes to fill a conventional car’s gas tank to the same level. Tesla says its top-of-the-line superchargers need 15 minutes to add 200 miles of charge.
3. A couple of points: First, any estimate based on pending regulatory approval in the next 3 months is by definition optimistic. Second, Tesla's and, more to the point, Elon Musk's reputation in Europe may present something of a problem here.
From Hiltzik:
Nevertheless, the company’s sales are crashing worldwide. In the European Union they fell off a cliff in 2024, to 7,517 vehicle registrations from 15,130 the year before. The drop was especially steep in Germany, where Musk irritated voters by throwing his electoral support behind the extreme-right neo-Nazi party Alternative for Germany. There, new Tesla vehicle registrations fell by 76.3% in February from the same month a year earlier— that is, to 1,429 from 6,029.
4. Putting aside the issue of a tax credit in the current environment, the low-priced Tesla has been a year away for more than a decade now. The company recently scrapped its long-promised low-cost Model 2. The plan now appears to be to launch a stripped-down Model Y, which, as former Tesla bull Fred Lambert points out, will probably mainly serve to cannibalize the already shrinking demand for existing Model 3/Y sales.
5. And 6. Where do we start? The general stupidity of humanoid bipedal designs for robots? The dubious market? Or the fact that the company is at least a decade behind its competitors in this field?
7. The prototype for the Tesla Semi was introduced in 2017, with production supposed to start 2 years later. The vehicle went years over schedule. The reviews from engineers and design experts were brutal. Its performance has been spotty, and at one point, it shut down I-80 for 16 hours after catching fire. During that time, it spewed out toxic smoke and took 50,000 gallons of water to extinguish.
These seven reasons appear to be repeated verbatim from Musk and other representatives of the company. Of course, credulously accepting the dubious claims of Elon is a long-standing tradition in the financial press; however, this particular case has an interesting backstory.
From FT Alphaville
The judiciary is under attack; Fannie Mae just added a cybersecurity engineer at SpaceX and social media group X to its board of directors (though he left two days later); and Cantor Fitzgerald’s former chair and CEO Howard Lutnick has been pushing Elon Musk’s Starlink to federal officials....Coincidentally, Cantor senior equity analyst Andres Sheppard on Wednesday upgraded Tesla to “overweight” from “neutral”, his change of view triggered, he says, by a trip to the car company’s Austin gigafactory and AI data centers earlier this week....Lutnick divested his business interests in Cantor Fitzgerald upon becoming Trump’s secretary of commerce precisely to avoid any potential conflicts of interest. His sons Brandon and Kyle were promoted to chair and executive vice chair at the same time.
And from Hiltzik:
Lutnick didn’t disclose during that appearance that the investment firm he headed before taking his government job, Cantor Fitzgerald, held about 740,000 shares of Tesla as of Dec. 31, according to its latest government disclosure.
The holdings were valued that day at $403.84 each, or about $299 million. Their value has declined to about $174.8 million as of Thursday’s close.