We recently published a list of 7 Best Car Stocks To Invest In Now. In this article, we are going to take a look at where Tesla, Inc. (NASDAQ:TSLA) stands against other best mid cap growth stocks.
Robotaxis: A Market Not To Be Ignored
A lot of the conversations in the automotive space right now, specifically with respect to electric vehicles, is the impending arrival of robotaxis – autonomously driven taxis for ride-hailing – in the US market and beyond. There are several major players in this market at present, including notable Chinese EV makers and, perhaps most importantly, Elon Musk’s well-known autonomous vehicle manufacturing company. With this new product set to be unveiled in less than a month now, many investors are wondering about how the automotive sector will develop as the world gradually shifts to electric vehicles.
A lot of the talk surrounding EVs has been discouraging these past few quarters, primarily because sales for EVs are down in light of higher price tags. The robotaxi business model is something that is thus generating a lot of excitement because this is a fresh new take on the EV space – and one that allows for the rise of EVs in a more cost-effective manner. According to ARK Invest’s Director of Investment Analysis, Tasha Keeney, robotaxis demonstrating a strong hold over the automotive sector and generating growth is something that investors can expect to see over the next five years. She thus believes that ignoring robotaxis is a huge mistake for those following Musk’s EV maker’s progress and the general EV space.
How Will Robotaxis Expand the Ride-Hailing Opportunity?
Keeney believes that Musk’s robotaxis will be able to take over a significant share of the ride-hailing market because it offers a cheaper option to ride-hailers – especially younger ones. Taking the example of China, where robotaxis are currently being utilized for rides that cost as little as under a dollar, Keeney noted that Musk’s company can undercut the ride-hailing market in the US in much the same way. These days, a typical ride from the most used ride-hailing platform in the US costs about $2 on average. With Musk’s robotaxis, ride-hailers can expect to fully reap the benefits of lower operating costs because of the EV platform.
By adding the autonomous driving factor on top of this, Keeney expects robotaxis to really leverage the cost structure and lower ride-hailing costs overall. Through this, the possibility of more people being brought into the ride-hailing market seems to look less like a distant possibility and more like an inevitable development. This is especially the case for younger individuals, who would see the benefit of foregoing buying new vehicles and instead opting to catch an autonomous ride that will likely cost them much less than a traditional ride-hailing service and definitely less than driving their own personal cars.
Despite all this, Musk is expected to face immense competition from other markets, particularly China, where EVs and robotaxis are being developed at speeds at least as impressive, if not more, than those seen in the US. Despite this situation of having to share market share with other players, investors can expect companies working in the EV space to see greater growth in the next few years. Considering the immense opportunity present in the automotive space based on this analysis, we have compiled a list of the best car stocks to invest in now.
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).
25 Most In Demand Cars Heading into 2024
Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 85
Tesla, Inc. (NASDAQ:TSLA) is Elon Musk’s famed EV manufacturer based in Austin, Texas.
These days, the hype around Tesla, Inc. (NASDAQ:TSLA) is mostly concerning its robotaxi business, which many investors like Cathie Wood expect to be a game changer for the EV company. Wood expects the robotaxi business to be incredibly successful for Tesla, Inc. (NASDAQ:TSLA), which is instilling a greater sense of confidence in other investors, especially since another robotaxi business, Waymo, has already had some success and is operating quite well with 700 autonomous vehicles already being on the roads.
Tesla, Inc. (NASDAQ:TSLA) also has a strong history of growth. Over the past five years, the company has increased revenue by 30.8%. Analysts are also bullish on the stock, with Deutsche Bank’s Edison Yu placing a $295 price target on Tesla, Inc. (NASDAQ:TSLA) on September 10 – one of the highest valuations on Wall Street right now. The primary reason for this high valuation is the fact that Tesla, Inc. (NASDAQ:TSLA) has other business segments that are complementary to its EV business, such as its network of EV chargers and energy storage and robotics businesses.
In total, 85 hedge funds were long Tesla, Inc. (NASDAQ:TSLA) in the second quarter, with a total stake value of $4.9 billion.
Overall, TSLA ranks 1st on our list of 7 best mid cap growth stocks. While we acknowledge the potential of TSLA as an investment, we believe that AI stocks hold promise for delivering high 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.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
