Galileo Russell, the founder of HyperChange, thinks that Tesla can be a “trillion-dollar company in the long run.”
That’s a pretty bold statement to make at the current moment, Tesla is not yet consistently profitable and bleeds money in most financial quarters.
But still, the company is innovative, is pushing boundaries, creating hype around EV’s, and has been doing so for more than ten years now. The company captures over 60% of total EV sales without any advertising.
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Now, if we were to take a cursory look at Tesla, we would see that the automotive car company or software company acting as a car company, commands a market cap of $75 billion. I’m betting that Tesla’s market cap will decrease even further shortly before it rises again.
It hit the magical $420/share before slightly sinking within the past week.
Still, I haven’t followed the company has intensively as Ross Gerber or Galileo Russell, so I’m interested in understanding what they know and why they might expect Tesla’s market cap to increase by 10X over the long-term.
What’s there to bullish about on Tesla?
Let’s find out.
Positive Contributing Factors For Tesla Stock in the Short Term
Those who bet against Tesla, will take precautions and cover their short position at a loss. These Tesla stock shorters will have to buy back their borrowed Tesla shares and remove their short position, pushing the price upward.
There’s no substantial argument, in the near term, to be short on Tesla.
Investors expect profitability in the near quarters due to Tesla EV’s sold in China and Europe.
Mad Money’s Cramer Came Around On Tesla
Cramer is finding love for Tesla while turning sour on Netflix. The Mad Money host says that Tesla is cult-like, where people gobble up the stock because they love the product and don’t pay attention to things like a balance sheet.
Of course, this means that these battleground stocks will likely have troubling financials. Lastly, Cramer notes that companies like Tesla have charismatic leaders.
The Mad Money host points out that several close people around him love Tesla, and sees that Tesla Cybertruck deposits as a sign of potential longevity and further enthusiasm. Further, he doesn’t think that Tesla will have any real trouble raising money.
Tesla Long Term
Russell and Others Believe That Tesla Creates Value in Batteries and Autonomous Driving
Investors like Russell see that Tesla is one primary company paving the way in autonomous driving, and battery technology simultaneously. Those are all important themes as these components are what many experts believe will be part of the future.
The company also recently delivered its cars to buyers in China, and people like Russell believe that Tesla may have an advantage over other car makers in that region. Further, Chinese banks recently participated in a debt funding round for Tesla to build a facility in China.
Galileo Russell is a shareholder in the company. He says he is looking forward to keeping things that way for the long term.
Is It Really ‘Made in China’?
It is important to note that Tesla makes its parts, including batteries etc. all in the USA. The pieces arrive at the factory in China, where the assembly takes place. Remember that is where it gets tricky, the cars say, made in China, but made just means assembled.
Investors agree that delivering kits to China is more expensive for the company, and Tesla plans to source the manufactured parts in the coming year locally. The latest reports note that Tesla booked around $700 million in revenues in China.
LMC Automotive, a research company, notes Tesla sales of around 10,542 vehicles in China in Q3 2019. The Tesla Model 3 car runs a Chinese consumer, $62,000. If Tesla is produced entirely in China, it would cost the customer $51,000. The product would also not require the customer to pay an additional purchase tax of 10 percent.
With these numbers, Galileo Russell is confident that Tesla will be able to cut down on costs and therefore be able to reduce the cost for buyers as well. China has a market for electric cars, and this could only lead to more conversions for Tesla.
But Can Tesla Do It?
One must remember that this year Tesla was able to deliver only 15 cars to customers in China. It has not begun mass production yet as Tesla announced that it would not begin for several months.
It has to do it. It has no other option but to increase sales, deliver and keep progressing to bring in financing and continue to exist.
The pressure is perpetually on at Tesla and will likely remain so until they grow out a market and reach a certain level of stability with their financials.
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