Uber and Tesla Stock Set to Collide
Since Tesla Motors, Inc. (NASDAQ:TSLA) is leading the charge on driverless technology, we should expect some friction between Tesla stock and Uber Technologies, Inc. TSLA stock has skyrocketed in recent years and Uber is the most valuable startup of all time, so both sides would be well financed.
Both sides are researching driverless technology. Since it’s in the ridesharing business, Uber could add a fleet of self-driving cars to its ride share business and start cutting costs on drivers. Does that mean it poses a threat to Tesla stock?
Actually, no. The real threat runs the opposite way, from Tesla to Uber. Judging by its last earnings call, Tesla could break into the ride share business. TSLA stock has the faith of the markets, meaning it can afford to branch out into tangential lines.
If Tesla launched a competitor to Uber, what does it mean for TSLA stock? It doesn’t stretch the imagination to see that Tesla stock would soar from the company’s additional revenues.
TSLA Stock Earnings Call
Speaking on the Tesla stock earnings call, an analyst from Morgan Stanley & Co. LLC asked Elon Musk a brilliant question and the answer was incredibly telling about the future of TSLA stock.
The analyst asked, “Do you see a business case for selling autonomous cars to ride-sharing firms or can Tesla cut out the middleman and offer on-demand electric mobility services directly from the company’s own platform?” (Source: “Tesla Motors (TSLA) Elon Reeve Musk on Q3 2015 Results – Earnings Call Transcript,” Seeking Alpha, November 4, 2015.)
Elon Musk was incredibly tight-lipped about plans to move Tesla into the rideshare business. He said the question was “quite a smart one,” but he declined to answer: “I think there’s a right time to make announcements,” said Musk. “And this is not that time.” (Source: Ibid)
That could seem like a flippant remark, but Musk’s reluctance to commit is a little strange. It’s not like him to duck questions about the long-term direction of Tesla, which makes me think the question struck too close to home.
The reason he avoided answering is likely an indication that Tesla could challenge Uber. Musk did add that Tesla’s strategy wasn’t “fully baked,” but that’s not the point. The important point is that he didn’t challenge the premise of the question.
Tesla Stock Could Catapult from Uber-Like App
By mimicking Uber and offering customers on-demand and ride-share transportation, Tesla could fill the void in its income statement. The company delivered a net loss last quarter, because Elon Musk is playing the long game, meaning investors need to take a more long-term look at TSLA stock.
Must wants to make sure that everyone drives an electric car out of choice. Tesla is his outlet for that vision, but the revenue cycle is tricky. TSLA stock has sagged under the heavy investment needed to build charging stations and battery factories. A rideshare app like Uber could provide the revenue the company needs and with low upfront costs. The income would help Tesla stock supplement its appeal to investors, while maintaining the company’s core mission.
Considering how much sense the move makes for TSLA stock, Uber should watch out.