Tesla Stock Predictions: Don’t Discount Tesla’s Significance In Self-Driving Cars

motek 1The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology  – Senior Analyst at I Know First

Tesla Stock Predictions

Summary:

  • This is my rebuttal to Barron’s dismissal of Tesla’s significance to Nvidia’s future.
  • Tesla’s brand power and future growth as a 500k/year car producer makes it a significant contributor to the fortunes of chip suppliers like Nvidia.
  • Unlike Google’s Waymo, Tesla now has real-world factories to produce its electric cars. It doesn’t have to share its technology/secrets with third-party car assemblers.
  • Tesla switching to Intel processors for its infotainment and self-driving car processors will allow it to enjoy the same benefits of the Intel and Waymo alliance.
  • I Know First has negative short and intermediate term algorithmic forecasts for TSLA. Wait for the bears to punish TSLA so you can get a cheaper entry point.

I would like to dispute the misguided assessment of Barron’s Asia that Tesla (TSLA) is insignificant to Nvidia (NVDA). Barron’s Asia claimed that the rumor of Tesla switching to Intel (INTC) for its infotainment processor and that it is working on its own AI processor should not affect Nvidia’s fortune. It argued that Tesla’s annual car output is so small right now, Nvidia won’t feel the loss of Tesla switching to Intel or Advanced Micro Devices for its Autopilot/infotainment chip requirements.

Barron’s Asia is guilty of myopic thinking. Tesla’s current super-high valuation is because investors foresaw its major leadership role in autonomous electric cars. Tesla is now the world’s fourth most valuable car company because industry experts and investors already expect its long-term importance to the global car industry. Tesla’s production rate right now might be low but it will eventually grow.

Going forward, Nvidia will feel the pain once Tesla starts producing 500k self-driving electric cars per year. Tesla will still pay the same price for self-driving car processors it will use on Autopilot add-ons for the Model 3, Model S, and Model X. A self-driving car processor/computer vision processor will probably cost around $1k to $2k each. Going forward, Nvidia not getting 500k Xavier processor orders from Tesla at $2k (my guesstimate) each is a significant loss.

Tesla switching to Intel and/or AMD for its self-driving car processor requirements is therefore very significant to the future of Nvidia.  NVDA’s price dropped after rumors of Tesla working on its own self-driving car AI processor because investors knew Nvidia will suffer a significant long-term loss if Tesla drops it as a partner.

Tesla Will Eventually Need Lots of Self-Driving Car Processors

Tesla’s future significance to semiconductor companies is obvious. Tesla is the most trusted brand in electric cars. The future of the auto industry will likely be all-electric cars. These electric vehicles would all be equipped with Level 4 and/or Level 5 autonomous driving feature. Electric cars help save the environment, and self-driving helps saves lives.

Like Waymo, Tesla is a pioneer in autonomous vehicles with its add-on Autopilot technology. Tesla’s Autopilot 2.0 uses eight cameras to introduce full autonomous driving cars. Autopilot 2.0 also uses GPS and radar data to fortify its 100% Level Level 4 or Level 5 self-driving feature.

(Source: Tesla)

Once Tesla is operating at a net profit, it will have enough money to lobby the U.S. congress to approve commercial electric cars with Level 5 autonomy. Once the U.S. authorities approve fully autonomous electric cars on the road, other countries will follow. Five years from now, Tesla could be the biggest buyer of self-driving car processors, not Waymo.

Like I mentioned earlier, Google has no factories to produce its own self-driving cars. It doesn’t have the expertise to do so.

Tesla only needs to produce enough cars, like 500k/year, to save on production costs and enjoy the benefits of economy of scale manufacturing. Tesla really has no need to develop its own self-driving car processors. It should just instead switch to Intel’s Mobileye platform. Since it is not yet making a profit, Tesla doesn’t have the extra money and resources to waste on developing its own AI processor.

Intel can take care of that hardware burden and Tesla can just focus on improving its Autopilot software. Intel can supply all the cameras, sensors, and processors that can make an Autopilot-enabled Tesla car fully connected and 100% self-driving.

Conclusion

Tesla’s advanced manufacturing process is its key advantage against Google’s Waymo and Baidu’s (BIDU) self-driving car projects. Tesla doesn’t have to rely on other car assemblers to launch its all-electric, level 5 self-driving car. Its camera-based or computer vision-enabled Autopilot 2.0 self-driving platform fits Intel/Mobileye’s camera-based approach. I won’t be surprised if Tesla goes all-Intel soon.

Google trusted Intel to be its partner for Waymo. I think Tesla will also do the same.

TSLA has a negative short and medium-term algorithmic forecasts from I Know First. My recommendation therefore is for you to wait if TSLA will really go down further. Buying this company’s stock at below $310 is a future juicy opportunity.

I Know First has a positive one-year forecast for TSLA. Buying the stock on the dip and waiting for a year might prove profitable.  Analysis of the long-term (monthly) technical indicators and moving averages also favor my bullish long-term buy recommendation for TSLA.

(Source: Investing.com)

Past I Know First Forecast Success with TSLA

I Know First’s algorithm has made accurate predictions on TSLA in the past, such as its bullish article published on September 20th, 2016. In the article, it explains that Tesla’s stock currently touts strong buy signals from the algorithmic forecasts of I Know First. The 3-month and one-year algorithmic forecasts of Tesla are quite high. The predictability factor of the 1-year forecast is also above 0.5. The probability is therefore favorable that Tesla stock will increase significantly within 1 year. In the one year prediction from September 20th, 2016 to September 20th, 2017, TSLA shares increased by 82.72% in line with the I Know First algorithm’s forecast. See chart below.

Tesla Stock Predictions

(Source: Yahoo Finance: TSLA)

This bullish forecast for TSLA was sent to I Know First subscribers on September 20th, 2016. To subscribe today click here.

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.

Tesla Stock Predictions


Tesla Stock Predictions