Are Tesla Semi Trucks the Right Move?
Many words can be applied to Tesla Inc (NASDAQ:TSLA), but “timid” is not among them. The company is boldly unveiling a line of Tesla semi trucks in September. And we have reason to expect to see a Tesla pickup truck sometime in the near future.
Needless to say, Tesla stock is going wild in response to these tidbits of news. But wild in which direction? Up or down? After all, not all news is good news (contrary to popular opinion).
Sometimes companies overreach. Stretching out their grasp to the stars, they stumble and fall back to Earth. There’s no silver lining there; just abject failure.
Luckily, this hasn’t happened to TSLA stock.
Shares are trading near record highs! Right now, I’m looking at a quote of $305.52, meaning that Tesla’s year-to-date performance is a sparkling 43% increase. Not bad. Not bad at all.
The market is finally appreciating that Tesla is more than what it seemed. It isn’t just a car company. It never was. It is, in the words of Amazon.com, Inc. (NASDAQ:AMZN) CEO Jeff Bezos, a “Day 1” company.
It might be a little weird to use Bezos’s words to describe Tesla, since he and Tesla’s CEO, Elon Musk, are rivals. But I don’t really care about the personal beef between billionaires.
“Day 1” is just too perfect a description for Tesla.
It describes a mentality. When young companies are hungry for growth. When they work harder, faster, and smarter than the competition. When they don’t make excuses, but they deliver growth.
That is the “Day 1” mentality.
Bezos uses this philosophy at Amazon.com, which is why AMZN stock is one of my favorite investments of all time. But Musk uses the “Day 1” strategy as well.
Think about it: Tesla is already the most successful electric car company of all time.
Chart courtesy of StockCharts.com
TSLA stock has already returned 1,491% to its earliest investors. How much more could a person want? Musk could quit now, and Tesla would still be a historic success.
But that’s not in his DNA.
Musk wants to keep Tesla in that “Day 1” mentality. First an electric supercar, then an electric luxury sedan, followed by an electric SUV, and a mid-priced electric sedan.
Next on the roster is a Tesla electric truck. Then a Tesla pickup truck and, believe it or not, an electric Tesla bus. Musk wants to “expand to cover the major forms of terrestrial transport.”
He doesn’t do this for his own amusement.
He does it to have an impact on the world and, of course, to keep TSLA stock heading skyward. The share price is likely to stay upbeat as long as the company stays in a “Day 1” mentality.
So, to answer the original question: yes, semi trucks are the right move for Tesla.
How Tesla Semi Trucks Can Boost Tesla Stock Projections
Tesla semi trucks are different from the usual menu of products, in the sense that semi trucks are sold to companies, not individuals. And, thus far, Tesla has been selling to individuals.
That’s a big break from tradition. It’s a “Day 1” move.
Companies tend to be more rational than people, which means that the shift toward corporate sales is a good thing for Tesla. At least companies try to make smart decisions.
People, on the other hand, are completely emotional. We glory in our nonsensical, irrational desires. No one needs a new “iPhone” that’s slightly better than the one they bought two years ago. But you can bet that millions of people will buy the “iPhone 8.”
Tesla already took advantage of this weakness in human psychology.
The company did something that no one expected—it delighted its consumers. Those who bought a Tesla weren’t forced to weigh the moral consequences of global warming or anything like that. No politics required. Tesla just offered them an irresistible car.
All Tesla vehicles combine style, performance, and a vague-but-pleasurable feeling of being “in the know.” The result is a seriously powerful brand.
Now Tesla is using that brand to draw in bigger fish. The corporate clients it’s targeting won’t buy Tesla semi trucks in ones and twos—they’ll buy Tesla electric trucks by the fleet.
What’s more, Tesla will have an easier time convincing corporate clients than they did regular Joes. As such, I’m altering my Tesla stock analysis.
I wouldn’t be surprised to see the share price hit $400.00 in 2017. Why not? Its year-to-date returns are already at 41%.
I know it’s foolish to extrapolate these gains to the future, but there’s strong evidence that unveiling a Tesla semi truck can kick-start a rally. Here are three reasons I have come across:
1. Tesla’s Self-Driving Technology
Trucking firms will likely start to replace some drivers with autonomous trucks.
Since Tesla is a noted forerunner of this technology, I’m expecting the company to capture a sizeable chunk of the market. Here’s how it works: several trucks line up, with a human driver in the lead truck.
He or she drives manually, and all the remaining trucks follow autonomously. It’s not exactly legal yet, but Tesla and others are working with regulators. A framework should emerge soon.
As investors price in the potential of autonomous trucks, TSLA stock skyrockets. It’s a pretty simple equation but, in my experience), simplicity often lands close to the truth. Occam’s Razor, I guess.
2. Tesla’s Supercharger Network
Distance is an obvious weak point of electric vehicles.
Every TSLA stock bear that I know points it out. “Electric cars can’t go further than 200 miles,” they say. “Trucks need to drive cross country!” They’re right.
But perhaps they aren’t aware that Tesla is installing charging stations across the country. Tesla electric trucks will be able to recharge very soon, meaning that smart trucking firms won’t hesitate to cut their gasoline costs. Below is a map of Tesla’s charging stations.
(Source: “Supercharger,” Tesla Inc, last accessed April 21, 2017.)
The scope of Tesla electric trucks has not clicked with investors yet. Once they understand that the “Supercharger” network allows Tesla to destroy conventional trucking companies, we could see an immediate lift in Tesla stock. Hence, my $400.00 target.
3. Tesla’s Battery Production
After the initial glee fades, investors will start asking tough questions about Tesla semi trucks. How can Tesla scale up when it’s already making the “Model S,” “Model X,” and “Model 3?”
How can it possibly meet demand?
One word: “Gigafactory.”
Tesla’s main constraint was identified years ago: batteries. The company needed a lot of batteries to manufacture electric cars, but there weren’t nearly enough batteries available in the world.
So, Tesla built the Gigafactory. It’s a massive plant in the Nevada desert. And when I say massive, I mean it has the largest footprint of any building on planet Earth.
You could lay two Empire State Buildings end to end on the ground, and they still wouldn’t match the length of the Gigafactory.
This factory is going to spit out batteries faster than bullets from a machine gun. That’s not an exaggeration—it is a fact. To add icing on the cake, the building will run on renewable energy and operate around the clock.
Put another way, I’m not worried about Tesla meeting its demand. This company has a roadmap in front of it. Now it just needs to stay on track.
Investors need this penny to drop before they can fully commit to Tesla stock, and I’m guessing that happens this year.
Tesla making the shift to corporate sales will be the straw that breaks the camel’s back.
Conclusion: Tesla Stock Prediction 2020
In the near term, I see wants so desperatelya TSLA stock rally based on Model 3 production. The promise of Tesla semi trucks will keep upward pressure on the stock as well, but what about over the next three years? What happens to Tesla stock by 2020?
That is a more interesting question. To be honest, I don’t think the Tesla pickup truck will have a noticeable impact on the share price. It’s just not significant enough to make a dent. But there are other “Day 1” factors at play.
For example, the SolarCity Corp (NASDAQ:SCTY) acquisition will take a few years to unfold. Right now it is a pit that swallows up cash. However, it’s going to make Tesla an end-to-end energy company, which is what Musk wants so desperately.
He wants Tesla to sell solar panels to collect energy, batteries to store energy, and electric cars to use energy. In other words, he wants Tesla to eliminate utilities, carmakers, and trucking companies in one fell swoop.
Musk wants to overturn entire industries and sack their wealth. He already has first-mover advantage in the field, not to mention a whole lot of brand recognition. He clearly knows what he’s doing.
Anyone continuing to doubt his vision, or his ability to execute that vision, is simply crazy.
Did they not see what I saw last year? When Tesla eked out a profit, all while delivering a record number of cars? It was phenomenal achievement that convinced me that Musk is the real deal.
Don’t get me wrong. He’s not the most punctual guy.
Has he missed self-imposed deadlines? Absolutely. That’s why the market hasn’t priced Tesla stock according to its full potential. Investors remain skeptical of his forward guidance.
But here’s my question: did Musk hit those targets eventually? Yes, he did.
So, if you just stretch out your time horizon, TSLA stock suddenly starts to look like a bargain. Consider that before you conduct your own Tesla stock analysis.