The only reason to buy Tesla stock has nothing to do with EV business

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The only reason to buy Tesla stock has nothing to do with its EV business, market strategist says

Colas estimated that about $600 billion to $700 billion of Tesla's current market value is"a call option on autonomous driving."

"Even Elon Musk himself has said Tesla is worth almost nothing without this technology. If and when autonomous is ready for prime time, Tesla should be there first or at least early. That is a trillion-dollar opportunity at the very least. But it is also an incredibly difficult challenge to make a truly self-driving car," Colas said.

The remaining $200 billion to $300 billion of Tesla's current market valuation is assigned to the company's EV business, which is comparable toBoth Toyota and Tesla"will almost certainly be around in 20 years making cars. I cannot confidently say the same thing about any other auto company in existence today. That's how hard the next two decades will be on this industry," Colas said.

That means if Tesla fails to deliver on full autonomous driving technology, its stock could plunge about 70% based on Colas' valuation model. "The investment takeaway is pretty clear cut: avoid traditional auto stocks, and only overweight Tesla if you have a degree of conviction that Musk and his team can soon deliver a truly autonomous vehicle," he said.

 

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