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Piper Sandler's latest investment note on Tesla constitutes a manna of sorts for the dilapidated bulls, bestowing the right dose of euphoria to overcome investors' gloomy mood following last week's earnings disclosure for the second quarter of 2024, which among other things showed that the EV giant's automotive gross margin (ex-regulatory credits) continues to crater.
Piper Sandler on @Tesla: "Investors have grown accustomed to ignoring Tesla's hyperbole around full self-driving. However, judging by reviews on X, Tesla's update to version 12.5 is "revolutionary." The firm thinks investors should consider the possibility that Tesla's decision… https://t.co/prz3PPoGrx
— Sawyer Merritt (@SawyerMerritt) July 29, 2024
At the outset, Piper Sandler analysts concede that "investors have grown accustomed to ignoring Tesla's hyperbole around full self-driving." However, the analysts then declare that, as per the general views on the X social media platform, the EV giant's FSD version 12.5 is "revolutionary." Consequently, Piper Sandler analysts believe that the upcoming robotaxi event on the 10th of October is likely not a "ploy to distract from falling EV sales."
Coming to Tesla's core bullish thesis, Piper Sandler analysts note that the EV giant is already working on a more affordable version, dubbed the Model 2, that is expected to be priced at between $25,000 and $30,000. This essentially means that Tesla will earn a zero percent gross margin on the vehicle itself. Instead, the entirety of its profit will be derived from the uptake of FSD, whose monthly subscription price is likely to increase from $99 to $500.
While hammering on the FSD's importance, Piper Sandler analysts note that Tesla's fair value would tumble to just $77 per share without self-driving capability. Just like "cheap flip-phones," the analysts believe that no one "will buy non-FSD cars" in the future.
Piper Sandler has maintained its Overweight rating on Tesla with a stock price target of $300 per share.
Meanwhile, investors are also getting excited about Tesla's humanoid robot, dubbed the Optimus. In response to an X post that illustrated the AI-related prognostications of the celebrated British film writer and director Daniel Kokotajlo, Elon Musk recently noted that Tesla will start using its Optimus humanoid robot internally in small numbers in 2025. By 2026, the EV giant intends to ramp-up the humanoid robot's production and formally add it to its product portfolio.
At the time of writing, Tesla shares are up around 4 percent in early morning trading.
