Tesla stock dipped, then inched up Tuesday as car makers around the world weigh what autonomous driving technology means for their business. It’s a disruptive threat—but for now, legacy car companies don’t appear interested in licensing Tesla’sself-driving technology.
Shares traded as low as $405.95 before closing at $419.40, up 0.4%. The S&P 500 and Dow Jones Industrial Average gained 0.9% and 1.4%, respectively. Tesla’s gain was relative small, considering Monday’s 6.2% jump.
On Monday, the market rebounded with the Nasdaq Composite up 2.7%. Tesla bounced more in part because it was down more. Coming into the week, shares were down 14.3% for the month.
Self-driving optimism also helped. Melius Research analyst Rob Wertheimer wrote Monday that Tesla’s Full-Self Driving, or FSD, technology was improving rapidly and expanding its lead over the traditional car industry.
“Over the past decade and even up to a year or two ago, we assumed others could catch up quickly,” wrote Wertheimer. “Now we are not quite so sure…we are thinking about chips, vertical integration, software, and the decision to think of the vehicle differently. The auto business is an old one, and perhaps too much of operations and strategy for legacy automakers was aimed at cost.”
The inability of a century-plus-old industry to think like a tech start-up isn’t new. Tesla CEO Elon Musk has hinted in the past that one solution would be for the existing industry to license Tesla’s tech. That doesn’t seem to be going anywhere.
“I’ve tried to warn them and even offered to license Tesla FSD, but they don’t want it! Crazy,” tweeted Musk on Monday. “When legacy auto does occasionally reach out, they tepidly discuss implementing FSD for a tiny program in five years with unworkable requirements for Tesla, so pointless.”
Auto makers’ apathy might come back to bite them. “We don’t think it’s easy for legacy automakers to catch up; most seem many years behind and maybe don’t even have the right attitudes or designs or business models,” added Wertheimer. “Karl Benz launched the first production car in 1893 at the Chicago World’s Fair. Twenty-five years later, horse carriages and related items were down 60%, and if not for the depression, the final collapse might have come sooner.”
He’s all-in on the disruptive potential of self-driving cars, rating Tesla stock Buy. His price target is $525 per share. Overall, 41% of analysts covering Tesla stock rate shares Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%.
The average analyst price target for Tesla stock is about $401. There is, however, a wide dispersion in analyst price targets. Tesla targets range from roughly $120 to $600 a share. The $480 spread is about 120% of the average target price. The same calculation for Apple stock yields about 40%.
As of Tuesday, Tesla stock was up about 4% this year and up 19% over the past 12 months.
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