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Tesla Advances on Multiple Fronts Despite Volatility

Published 06/17/2024, 03:24 PM
TSLA
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Electric vehicle giant Tesla (NASDAQ:TSLA) has made significant strides recently on both the technology and business fronts, even as its stock price remains well below previous highs.

The company secured approval to test its advanced driver-assistance system in China, received a favorable shareholder vote on CEO Elon Musk’s compensation package, and garnered a bullish long-term valuation from ARK Invest.

However, Tesla shares are still down substantially in 2024.

Tesla Granted Green Light to Test Full Self-Driving (FSD) System in China

Tesla has been granted the green light to test its Full Self-Driving (FSD) system on streets in Shanghai and potentially Hangzhou, with initial assessments to be conducted by Tesla staff.

This approval comes on the heels of Musk securing permission to deploy FSD during a visit to Beijing. Advanced driver-assist capabilities are becoming increasingly common in China, with homegrown players like Xpeng (NYSE:XPEV) and Xiaomi (OTC:XIACF) also competing in this space. Although Chinese Tesla customers can purchase FSD for 64,000 yuan (~$8,800), the feature is not yet activated in the country.

Looking further out, ARK Invest’s open-source model forecasts Tesla’s stock reaching $2,600 by 2029, with a bull case of $3,100 and bear case of $2,000 per share.

The firm estimates that nearly 90% of Tesla’s enterprise value will stem from a robotaxi business within five years. ARK also notes Tesla is amassing autonomous driving data 110 times faster than Waymo and calculates that a Tesla in FSD mode is about 5 times safer than a human-piloted Tesla and 16 times safer than the average vehicle. The investment group ultimately sees Tesla’s business model transitioning to one of recurring robotaxi revenue.

Musk’s Compensation Saga

In a contentious vote, Tesla shareholders approved a $45 billion pay package for Musk, after his previous $56 billion compensation plan was invalidated by a Delaware judge who ruled Tesla’s board was not sufficiently independent from Musk’s influence.

While the shareholder endorsement counters the judge’s earlier decision, prominent institutional investors like Norway’s sovereign wealth fund opposed the package, and the vote doesn’t guarantee Musk will receive the windfall. Additional legal wrangling is expected. Musk’s original 2018 pay plan laid out 12 tranches of stock options tied to revenue and market capitalization milestones.

Tesla Stock’s Wild 2024 Ride

Around half an hour before Monday's close, Tesla shares were trading at $188.37, up 5.8%.

While the stock is well off its 52-week high of $234.50, Tesla still boasts a market valuation of nearly $585 billion on the back of a 45.53 trailing P/E ratio and $3.92 in earnings per share.

Year-to-date, Tesla’s stock has fallen 26.19%, severely underperforming the S&P 500‘s 13.87% gain. The disparity is even starker over the past 12 months, with Tesla down 29.61% versus the benchmark’s 23.17% return. However, long-term investors have been handsomely rewarded, as Tesla has soared 1,180% over the past five years, dwarfing the S&P 500’s 88% rise.

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Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

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