Summary:
- Tesla’s stock price has a YTD return of -4.56%. It is currently trading significantly lower than its 52-week high of $900.40.
- TSLA is relatively overvalued compared to its carmaker peers. Irrational exuberance still gives TSLA a forward P/E valuation of 190.
- The recently unveiled Tesla Bot might be a tailwind next year. I, therefore, endorse TSLA as a risky buy.
- My fearless forecast is that the fast-growing $100 billion robotics industry can accommodate a $5,000 or even $10,000 product like the Tesla Bot.
- Elon said the Tesla Bot can do repetitive, boring chores that humans loath to do.
I argued that Xiaomi (XIACF) has a tailwind from the fast-growing $100 billion robotics industry. Elon Musk’s AI Day reveal of the humanoid Tesla (TSLA) Bot convinced me that we should go long on TSLA. Xiaomi is making electric cars. Tesla can also challenge Xiaomi’s CyberDog product by selling a domestic humanoid Tesla Bot. Elon explained that the Tesla Bot is an upcoming safe robot companion for humans. The tentative launch date is 2022. Tesla Bots could help deliver my 1-year price target of $750 for Tesla’s stock.
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Tesla Bot is 5-foot-8-inches tall, weighs 125 pounds, and cannot walk faster than 5 miles per hour. It will come with 8 AutoPilot cameras. Going forward, Tesla can improve its low-margin car business by becoming the no. 1 maker of domestic helper robots. The Tesla Bot could also become an efficient farm/factory worker. I can just imagine them working as orange/apple pickers in California or factory assemblers of Xiaomi Android smartphones and tablets. The deadlift strength of the Tesla Bot is 150 lbs. It will likely be powered by one or two 7-nanometer D1 custom AI processor designed by Tesla.
The Tesla Bot is the perfect service robot for farm work, household chores, restaurants, schools, and offices. The global service robotics industry’s estimated 2020 market size was $23.58 billion. Tesla Bot’s commercial launch next year (or in 2023) can help deliver that high 44.9% CAGR estimate for service robots. It was Tesla that made commercial electric cars popular. Tesla could start mainstream adoption of domestic/laborer robots.
Is This VaporWare?
I checked the cash position of Tesla and the chart below says it is affluent enough to build another factory for Tesla Bot robots. Tesla’s latest credit rating is Ba3. Any bank on this planet will gladly lend billions of dollars. Tesla is now posting a TTM net operating cash flow of $9.18 billion. A bank in China will not mind lending $2 or $3 billion to finance a new factory for Tesla Bots.
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The vision-centric Dojo AI supercomputer of Tesla can control/supervise Tesla Bots at homes, factories, schools, and farmlands. For a monthly fee, people can just let Dojo remotely manage a fleet of Tesla Bots working in an office building.
Investment Thesis
The investment thesis of this article is that the fast-growing $100 billion robotics industry might just elevate TSLA’s super-low net income margin of 5.21%. Robots might just become a more profitable growth driver than solar roof panels. Very few people can afford $40 electric cars. Hundreds of millions will be happy to pay $5k for a Tesla Bot. Selling robots might sustain Intel’s invidious forward GAAP P/E valuation of 190.09.
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Going forward, assembling and shipping out Tesla Bots for domestic use is going to be easier than assembling electric cars. Tesla can manufacture 206k cars per quarter. Tesla can create 400k robots per quarter 3 to 5 years from now. Using a base price of $5k per Tesla Bot, the projected quarterly revenue could hit $2 billion. Tesla’s quarterly revenue is $12 billion. Any product that can boost quarterly revenue by more than 5% is worth discussing and evaluating. Domestic robots could add $1 billion or more to Tesla’s annual net income.
Sad but true, Tesla’s super high valuation ratios cannot dispel the fact that it is still unable to deliver a decent net income. Selling Tesla Bots could help TSLA achieve an annual net income of more than $3 billion. A higher annual income ultimately justifies the pricey valuation of Tesla’s stock.
Growing beyond its electric car core business is an urgent need for Tesla. The electric car business is not a proprietary business. Other companies are already selling their own alternatives to Tesla Model S and Model 3. Becoming the pioneer in making domestic robots ubiquitous is good for Tesla’s top line and bottom line.
Tesla Stock Forecast: Conclusion
Going long on Tesla is not for the faint of heart. It is very risky to go long on a stock that has a high revenue growth rate but has super high valuation and low profitability. On the other hand, Xiaomi’s much cheaper valuation ratios do not make it the better robotics play. Tesla’s humanoid bot convinced me it can become the no. 1 domestic robot vendor. It looks feminine and non-threatening. Elon Musk’s robot design is not scary-looking like Boston Dynamics’ Atlas robot.
Tesla already proved its mettle by becoming the no. 1 maker of electric cars. Tesla’s Auto-Pilot software for its electric cars already made it a robotics company. Tesla has the cash power and decent credit rating to finance its expansion to the $100 billion robotics industry.
My risky buy recommendation for TSLA is backed by its somewhat bullish 1-year forecast from I Know First. Tesla stock’s received a 1-year trend score of 73.62. The stock prediction algorithm of I Know First is a little bit confident that TSLA will trade higher than $674 within the next 12 months. This is actually better than Seeking Alpha’s Quant Rating Neutral outlook for TSLA. Let us have more faith in the AI algorithm of I Know First.
Past Success With Tesla Stock Forecast
I Know First has been bullish on Tesla’s shares in past forecasts. On our April 22, 2020 premium article, the I Know First algorithm issued a bullish Tesla stock forecast. The algorithm successfully forecasted the movement of Tesla’s shares on the 1-year time horizon. TSLA’s shares rose by 398.50% in line with the I Know First algorithm’s forecast.
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