Tuesday, January 4, 2021
Tesla’s most important growth engine could end up being its Achilles heel.
On Monday, during a session that should have been dominated by Apple (AAPL) being the first business to reach a market capitalization of $3 trillion, Tesla (TSLA) did what it does best: it stole the show.
The hype surrounding the electric car maker’s phenomenal fourth quarter deliveries reached a crescendo as the iPhone maker set its intraday high-water mark — with the stock having its finest day in over a year. The illustrious Dan Ives, who dubbed it a “trophy case quarter” and predicted a $2 trillion market valuation for Tesla in less than two years, was among the Wall Street cheerleaders, according to Editorials99 Finance’s Ines Ferre.
Ross Gerber, CEO of Gerber Kawasaki Wealth & Investment Management, summed up the market’s ecstatic reaction to Tesla’s big Q4 coincident with Apple’s significant milestone.
Tesla’s software capabilities were praised by the investor more than its automobile production, which came under fire last week when the company announced a large recall of almost half a million vehicles. It also highlighted how two of technology’s biggest names are still linked years after Apple purportedly approached Tesla about a possible merger, which Elon Musk categorically denied.
“We’ve all realised over the previous 10 years that Tesla is a better AI technology company than a car company,” Gerber said last week on Editorials99 Finance Live, adding that the EV maker “will be the most impactful company in the history of business” within the next decade.
“They make automobiles, but what they’re really doing is putting an iPhone on wheels.” As a result, the entire infrastructure they’ve been creating around service, for example, has been a significant problem. They’ve come up with some incredible ideas, such as mobile service.”
In fact, not even Elon Musk’s tax-related stock sale, which temporarily put negative pressure on the shares, has slowed Tesla’s advance.
Garrett Nelson, senior equities analyst at CFRA Research, raised Tesla’s stock from a Hold to a Buy and raised the 12-month price objective to $1,250/share in a letter to clients on Monday.
Tesla’s gains in 2021 were lower than competitors Lucid’s (LCID) 280 percent increase and Ford’s (F) 136 percent increase, but “the completion of additional plants in Texas and Germany sets the stage for significant growth in 2022 and beyond,” he said.
The electric vehicle manufacturer is gaining popularity in Europe, with Electrek stating that Norwegians are rapidly adopting its vehicles. Tesla’s present and future, as well as a possible stumbling block for its objectives, are in China’s massive market.
The Wall Street Journal highlighted how the company’s opening of a new showroom in Xinjiang, a region at the centre of allegations of genocide against the Chinese government, goes against Musk’s image as an iconoclastic rule breaker who frequently tangles with US elected officials on Twitter, in a report published on Monday.
Tesla, like a rising number of corporate American powerhouses including Nike (NKE), Walmart (WMT), Intel (INTC), and, yes, Apple, is grappling with the Xinjiang dilemma. Beijing’s domestic troubles, combined with its distinctive brand of geopolitical hardball, have trapped the Sino-American bilateral relationship in a tangle of recriminations and tensions, as The Morning Brief has previously reported.
While China is an important component of Tesla’s success, it also has the potential to harm the company’s reputation if the international backlash against Beijing grows.
It also highlights the rising inconsistency of American corporations obliged to play a game of “get along to get along” with the Chinese government, even as they embrace increasingly divisive social positions at home – with little political repercussions.