We recently published a list of Analyst Says These 10 AI Stocks Have More Upside Potential. Since Tesla Inc (NASDAQ:TSLA) ranks 7th on the list, it deserves a deeper look.
King Lip, BakerAvenue Wealth Management’s chief strategist, recently talked to CNBC about the latest decline in tech stocks and market rotation. Lip said that he’s still bullish on tech stocks and a single event does not show a trend. However, the cause of decline in tech stocks last week was the lower-than-expected CPI data which caused investors to do some “profit taking” and invest in names that can benefit “more” from lower interest rates, according to the analyst. Lip noted that small-cap stocks, real estate stocks, among others, gained ground on the back of this trend.
However, Lip has high expectations from the upcoming earnings reports from tech companies. He also said that July has been one of the strongest months for tech stocks. Lip, however, said that major tech companies cannot go on to post record gains and their returns are expected to “fall in line with historical returns.”
Lip thinks the economy is entering a “Goldilocks scenario” where growth is steady but not “hot enough” to cause inflation. He reiterated his view that he expects strong earnings growth this year and in 2025, which could be a tailwind for stocks.
Asked what would cause earnings growth of tech companies, Lip said a lot of that comes down to efficient management and strong cash piles these companies have. He also said “slightly” lower interest rates could also be a tailwind for the economy.
Since Lip is bullish on tech stocks and believes major AI companies still have upside potential, we decided to take a look at the top names in his portfolio. These are the top holdings of King Lip, according to CNBC. With each stock we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Tesla Inc (NASDAQ:TSLA)
Number of Hedge Fund Investors: 74
King Lip’s portfolio also features Tesla.
Tesla shares recently plunged after the company postponed its much-awaited robo taxi event until October. However, Tesla bulls say their core thesis remains unchanged.
Cathie Wood recently set a $2600 price target on Tesla Inc (NASDAQ:TSLA) for 2029, which present a whopping 1300% upside potential from the current levels. Wood thinks the robo taxi project has the potential to deliver $8 to $10 trillion in revenue by 2030.
However, many believe Tesla Inc (NASDAQ:TSLA) won’t be able to live up to the hype around its robo taxi plans. Each robo taxi is expected to have a price target of around $150K to $200K, with some estimates suggesting Tesla Inc (NASDAQ:TSLA) would need about $35 billion to develop a global feet of such cars. Amid inflation and lack of preference for electric cars, American families will probably stay away from spending a fortune on robo taxis, which could cause a blow to Tesla Inc’s (NASDAQ:TSLA) plans in the future.
Alger Focus Equity Fund stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q1 2024 investor letter:
“Tesla, Inc. (NASDAQ:TSLA) is an electric vehicle manufacturer with a technological lead in its large and rapidly growing addressable market. In our view, Tesla is a transportation company that is setting the pace for industry innovation. During the quarter, shares detracted from performance after the company reported fiscal fourth quarter results, where revenues and earnings missed analysts’ estimates. Weaker-than-expected automotive revenues were partly driven by a reduced average selling price, which was down 15% year-over-year. Moreover, management decided to forgo providing volume guidance, though they did acknowledge they are in a lower growth phase given the uncertain consumer environment particularly as it relates to high ticket purchases.”
Overall, Tesla Inc (NASDAQ:TSLA) ranks 7th on Insider Monkey’s list titled Analyst Says These 10 AI Stocks Have More Upside Potential. While we acknowledge the potential of Tesla Inc (NASDAQ:TSLA), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TSLA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
