Why Tesla (TSLA) May Need To Stop Selling Cars To Hit $10k Per Share

Wild price targets on Tesla stock aren’t uncommon. But no matter how ridiculous a price target some analysts set, the stock races up to reach it. A similar occurrence was observed when Alexandra Merz, CEO of L&F Services, came out with a price target of $10,000 on the stock! Strangely enough, this involves a scenario where Tesla will have to stop selling cars!

Merz was talking to Yahoo Finance when she was asked about a price target for Tesla. This came in the context of ArkInvest’s $2500 price target, which she believed was well justified. However, her bull thesis values the company far higher.

When ArkInvest put a $2500 price target on the car maker, it didn’t include the company’s humanoid robot, Optimus, in its valuation model. Tesla is expected to start delivering the robot by the end of 2025, though one has to take Elon Musk’s delivery targets with a grain of salt.

We believe it is not the delivery date but the technological breakthrough that will define Tesla’s bull thesis. A humanoid robot is essentially a ‘vision to action’ translator. The robot will consume visual content and then act accordingly, adjusting its actions according to the environment. This would open the humanoid robot to the industry where thousands of applications will be possible, transforming the industrial landscape forever.

Once this technological breakthrough is achieved, Tesla’s car business may change. This is also what drives Alexandra Merz’s $10,000 price target bullish thesis. Tesla sells hundreds of thousands of cars and once sold, makes a dollar amount of profit on each car, with the car becoming the property of the owner. Once Tesla unlocks autonomy and launches its robotaxi fleet, it could stop selling cars altogether! Instead, the company could rent its robotaxis to individuals, resulting in recurring revenue with very high margins. While the company will continue to manufacture robotaxis, it won’t technically be a car seller anymore. In other words, something as outrageous as Tesla stopping the sale of its cars could unlock extraordinary value in the stock.

Tesla is 23rd on our latest list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 99 hedge fund portfolios held TSLA at the end of the third quarter which was 85 in the previous quarter. While we acknowledge the potential of TSLA as a leading AI investment, our conviction lies in the belief that some 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 as promising as 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 was originally published at Insider Monkey.