Please feel free to ignore my long-form musings below and continue on to the next post...
After much success, I like to recheck my original thesis and evaluate the risks to it:
What are the main obstacles to Tesla achieving a $20K stock price/$4T market cap by 2030?
I’ve broken them into 3 areas: Focus, Competition, and of course, Black Swan. I’m sure your concerns differ from mine, and I’d like to hear them.
Focus
It’s hard to imagine Tesla being this successful without the leadership of a certain Mr. Musk. He‘s running, at last count, 42 different companies disrupting every industry on, and off, earth.
If he were to devote substantially less of his time to Tesla, or to leave it outright, that would have a material impact over time. And the impact to market confidence would be outsized.
I traded Apple a decade ago, and when Steve Jobs “left” Apple, it made for a very difficult 2011, even though he’d built the company to the point that it could execute without him. Tesla is comparable in so many ways to Apple, but visionary leadership and execution on that vision are at the top. Elon exiting Tesla soon would likely alter its trajectory, despite how much of his “DNA” he’s injected into it.
The focus on Energy is a big factor here, too. After acquiring Solar City, the energy business took a back seat (pun intended) to the auto business, mostly for the M3 ramp. Good business decision, in retrospect. But we also saw the energy side languish, providing an uncomfortable glimpse into what it looks like when a product line isn’t being focused on. We know energy is the secret modifier that isn’t currently priced into the stock much, so is a risk if Tesla takes its eyes off it again.
Competition/Complacency
The fact is that Tesla is years ahead of everyone else in everything that matters, plus their brand is top-notch. But maintaining that lead is going to be harder as more resources are dumped into the competition. I know this is a tired TSLAQ trope, but only because there’s a kernel of truth to it.
Again drawing from Apple, the iPhone was revolutionary, and unique — for about a year before the copycats started. And they were good copies. I’m sure a lot of you unfortunates have Android phones (that have collectively outsold iPhones). There are plenty of companies that will give Tesla real competition. A couple of them will be spun out of the traditional automakers, and many will be startups, most of which probably don’t exist yet.
It’s easy to get complacent about that lead. Nio and some of the other 150 Chinese EV companies I don’t know much about could become global leaders. I’m not worried about the likes of Nikola, but Lucid looks legit. Again, they’re at the pre-production of Model S stage of their company, so are way, way behind, but I like what I see. Fisker may not be dead, yet.
The barriers to entry in the EV market are substantial, and Tesla has gotten over the hump that many will fail at surmounting. But some will succeed, and it could mean the difference in market share of millions of vehicles per year. So if the projection assumes, say, a 20% market share in 2030, that could be at risk.
There are also going to be lots of specialized vehicle companies that Tesla won’t compete directly with, but that may want strategic partnerships to share technology and to supply components. What’s going to happen to CAT over the next decade? Will Tesla supply them with EV tech, or will someone else?
Black Swan (nuclear war, aliens, global pandemic, etc)
So far, so good on this front...
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Do you disagree or have other risk areas I didn’t cover? Solid state batteries leapfrogging tech? Mr. Fusion?
Elon is the big wildcard from what I see; no surprise there. And I think that objectively he’s a pretty big risk as far as CEOs go, but this is where you either drink the Kool-Aid or you don’t.
But regardless of Elon and his quirks, there is very little question that EVs are the way forward, and that Tesla is leading that effort in multiple aspects in multiple markets, so why not bet on the current leader?
cheers!!
