We recently compiled a list of the 10 Best Self Driving Car Stocks To Buy Now. In this article, we are going to take a look at where Tesla, Inc. (NASDAQ:TSLA) stands against the other self driving car stocks.
Advancements in artificial intelligence, data analysis, and machine learning are shaping how industries perform today. These three technological advancements have enhanced the potential of autonomous vehicles and Advanced Driver Assistance Systems (ADAS).
However, are the consumers ready to put their hands off the driving wheel and trust self-driving vehicles? Let’s explore how the autonomous driving industry is progressing with almost all major automotive manufacturers investing significantly to put their Full Self Driving (FSD) cars on the road.
The Global Autonomous Vehicle Industry
According to a report by Mordor Intelligence, the global autonomous vehicle market is valued at $41.10 billion in 2024. The market is expected to grow at a compound annual growth rate of 22.75% to reach $114.54 billion by 2029. The COVID-19 pandemic hindered the overall output of the automotive industry thereby delaying the production and roll-out of self-driving cars. In addition, increased government regulations to ensure road safety have also proved to be a barrier for automakers. However, with significant improvement in software and hardware technology backed by artificial intelligence, we see automakers rolling out their Level 2 and Level 3 autonomous cars on public roads.
For instance, on June 25 CNBC reported that Waymo a leading autonomous vehicle company, opened its self-driving robot taxis for users in San Francisco. The company claims that more than 300,000 people signed up for the service. To cater for the growing number of users Waymo One has rolled out a fleet of 300 cars in the city.
According to a survey by McKinsey & Company, automotive market leaders believe the autonomous segment to be less fragmented due to the complexity and investment involved in its operations. As per the survey, 15% of the respondents believe North America will have most companies working and deploying autonomous technology in the future. In contrast, 38% of respondents believe the European market to be led by at most two or three companies.
Regionally speaking, China and North America are leading the race to become the first countries to roll out Level 4 highway pilot technology. Respondents of the survey are equally divided with 58% believing either country could be the first in Level 4 technology.
As mentioned above, developing and rolling out autonomous vehicles requires a huge investment in software technology. However, the investment is also expected to return high margins. The survey found that experts believe autonomous vehicle software is expected to have an average margin of 15% and hardware technology will add another 10% to the margin, thereby making the autonomous vehicle segment a lucrative venture for automotive companies.
Latest Trends in the Autonomous Vehicle Industry
Emerging trends in the autonomous vehicle industry are paving the way towards achieving level 5 autonomy. Some of the latest developments in the industry include, the use of Internet of Things (IoT) to allow vehicles to connect with other vehicles, its environment, and the internet. This not only improves the vehicle safety by providing quick data acquisition and analysis to make timely decisions based on the traffic changes on the road. New sensor technologies such as the LiDAR scans the surrounding of the car using laser technology. When these LiDAR sensors move continuously using multiple laser sensors they create a 3D representation of the surrounding ensuring the vehicle drives safely without collision. Almost all level 3 autonomous vehicles use LiDAR scanners to enhance vehicle visibility to around 300 meters during daytime.
Moreover, advancements in artificial intelligence such as object detection algorithms along with the LiDAR help the vehicle detect pedestrians, traffic signs, and other vehicles on the road. Other deep learning algorithms are helping improve the user experience by enhanced voice recognition, gesture recognition, and sentiment analysis to help interact with the vehicle efficiently. Last but not the least, Big Data analysis techniques are being utilized by autonomous automakers to improve vehicle autonomy through analyzing data collected through radars, scanners, and cameras.
Our Methodology
To compile the list of the 10 best self-driving car stocks to buy, we looked at autonomous driving stock holdings of the Global X Autonomous & Electric Vehicles ETF. We selected the top 20 stocks from the ETF holdings and ranked the stocks that were the most widely held by institutional investors, as of Q1 2024. The list is in ascending order of the number of hedge fund holders for each stock.
Why do we care about what hedge funds do? 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).
25 Most In Demand Cars Heading into 2024
Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 74
Tesla, Inc. (NASDAQ:TSLA) is a leading electric vehicle and renewable energy company based in the United States, with operations running internationally. The Automotive segment of the company offers electric vehicles, automotive regulatory credits, after-sale parts, and maintenance services. The company is one of the pioneers in autonomous vehicle technology and focuses on developing advanced driver assistance systems and is working towards developing fully autonomous self-driving cars.
CEO of the company, Elon Musk, who is also the richest man in the world has ambitions for the automation industry and has introduced “robotaxis” which would operate without a human driver. Tesla, Inc (NASDAQ:TSLA) is one of the best autonomous vehicle stocks and was held by 74 hedge funds during the Q1 of 2024, with total stakes worth $4.95 billion. ARK Investment Management is the top shareholder of the company with position worth $1.05 billion.
The company posted record quarterly revenues and profits in Q2 of 2024, despite increased competition in the EV market. Tesla, Inc. (NASDAQ:TSLA) was able to grow its revenue by 2% year-over-year to reach $25.5 billion and its total gross profits grew by 1% to reach $4.58 billion. The revenue growth was on the back of strong performance in the Energy generation and storage segment. In the second quarter, the company reached 9.4 GWh deployments resulting in revenue generation of more than $3 billion, indicating a 100% increase year-over-year.
The company was able to remain profitable on the financial front as well and generated $1.34 billion in free cash flow, a 34% increase from last year. Moreover, the company’s cash and cash equivalents and investments also grew 33% during the same time.
What sets Tesla Inc. (NASDAQ:TSLA) apart from its competitors is its advancements in the autonomous vehicle category. Management during the latest earnings call indicated having made significant progress in Full Self-Driving and Robotaxi, with version 12.5 beginning to roll out.
Moreover, the ambitions of management make Tesla, Inc. (NASDAQ:TSLA), what analysts call a “story stock”, where investors are willing to pay a premium not based on the current price but on what the company can achieve in the future. The company has been able to grow its top-line and bottom-line by 32% and 79% respectively during the past 3 years. 56 analysts have a consensus Buy rating on the stock, with their median price target of $225 presenting an upside of 17.33% from current levels.
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 TSLA ranks 7th on our list of the best self driving car stocks. While we acknowledge the potential of TSLA as an investment, 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.
