3. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 72
Tesla, Inc. (NASDAQ:TSLA) is an Austin, Texas-based EV giant under the leadership of Elon Musk. The company is at the third position on our list of the 12 best Reddit stocks to invest in.
The Reddit community has taken note of the recent sell-off in Tesla, Inc. (NASDAQ:TSLA), which provides an attractive entry point to investors. Following the sell-off, Ark Investment Management’s Cathie Wood has also taken fresh positions in the company during the last week. Ms. Wood and her team believe that Tesla, Inc. (NASDAQ:TSLA) has the potential to increase its total addressable market (TAM) by ten times if they introduce cheaper vehicle models. During the Q3 2022 earnings call, Mr. Musk revealed that the company is working on developing a variant that would be half in price as compared to the Model 3 and Model Y. Ark Investment Management’s team highlighted that a vehicle worth $60,000 only addresses 5% of the automobile market in the US. In contrast, if the price of the vehicle is $30,000, it would cater to 50% of the US market.
Here’s what Baron Funds said about Tesla, Inc. (NASDAQ:TSLA) in its Q3 2022 investor letter:
“Tesla, Inc. (NASDAQ:TSLA) makes fully electric vehicles (EVs), related software offerings, solar and energy storage products, and battery cells. After a tough second quarter that included a prolonged shutdown of one of Tesla’s key manufacturing facilities in Shanghai, the company demonstrated a significant 40% sequential increase in production volumes resulting in another quarterly record of production and deliveries. Despite the second quarter complexities, inflationary pressures, and production ramp-up of two new facilities (Berlin and Austin), the company exceeded Wall Street expectations in the second quarter. It maintained healthy 26% normalized gross margins, achieved industry-leading 18% adjusted operating income margins, and has generated over $14 billion of cash from operations over the past year. Moreover, due to Tesla’s high level of vertical integration and U.S. manufacturing capacity, the company is expected to be one of the key beneficiaries of the Inflation Reduction Act, qualifying for significant manufacturing and consumer-related incentives. We believe these incentives can add up to tens of billions of dollars over the coming decade, while also enhancing Tesla’s competitive advantage versus other automakers. The company also held its second artificial intelligence day, which presented continued advancements in its vehicle self-driving program and showcased its rapidly evolving humanoid robot developments (check out the Optimus videos on YouTube). We continue to believe Tesla is well positioned to benefit from complementary tectonic shifts in the automotive industry, including electrification, autonomous driving, and shared mobility. And, yes, Tesla is still effectively debt free, with over $18 billion of cash on its balance sheet, and investors are even speculating about a stock buyback, a far cry from worries of bankruptcy just a few years ago.”
