Many people claim that the Tesla share price (NASDAQ:TSLA) is overvalued compared to other automakers. But I think they are missing the point.
Tesla isn’t simply a car company. It’s on the point of being one of the world’s most advanced AI technology firms.
I started buying the shares during the technology sector decline around 2021. I was late to the party but still got a good deal and have seen sizeable returns since.
The good news is I reckon the party’s not over yet.
Why I think Tesla is awesome
Although the company is known for its electric vehicles, it is branching into autonomous taxi services. CEO Elon Musk mentioned recently that such a service could involve a 50/50 revenue split with vehicle owners.
My main concern with this is the company is dealing with challenging regulations. Such regulations are evolving and differ depending on country and jurisdiction, so I think it will take time to see a global fleet of robotaxis by Tesla. That means a really strong return from my Tesla shares could take time.
Cathie Wood, the CEO of Ark Investment Management, an advanced technology investment company, shares my enthusiasm for Musk’s company. Tesla makes up around 8% of ARKK, Wood’s most popular exchange-traded fund.
Now, ARKK is currently down around 70% since February 2021. But Wood’s firm owns some very volatile companies, not all of which I agree with. But I think the future of Tesla in her portfolios has a lot of strength.
If you’ve ever been in a Tesla, you know how different the experience is. I once joked with a taxi driver that he could drive his Tesla to my destination by just looking at the screen. The whole road — pedestrians and all — was shown.
I think this fun, advanced, and technologically superior strategy sets Tesla apart.
However, Musk recently warned that the company’s new Cybertruck will have a negative cash flow until mid-to-late 2024. That does concern me slightly.
Word on the Street
Wall Street has a range of views on Tesla. Analysts from Wedbush, Jefferies, and HSBC have revised earnings estimates for the company downward. They also expect short-term revenue growth to slow.
On the other hand, Morgan Stanley and Deutsche Bank expect a significant rebound in 2024 and steady five-year growth.
Personally, I think over the long term, the high software-like margins from robotaxis the company will generate will cause the share price to shoot up.
I reckon the current Tesla share price will be looked back on as a value opportunity.
I don’t think the general investing public realises the potential for Tesla’s AI margins. I believe that when they do, I’ll be cashing in.
I’m buying more
I’m taking a bit of every paycheck and putting it into Tesla shares. I now have about 7.5% of my portfolio in Tesla.
Of course, as a Fool, I’m always keen on diversifying my portfolio to avoid single-company risk. That’s why I can’t see myself increasing my allocation above 10%. I think that’s too risky.
I have a whole fleet of companies from complementary and contrasting industries that protect me from risk. More than anything, I want to sleep well at night. Owning Tesla like this means that I’m sure I will.
