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Tesla Billionaire Investor and TSLA Bulls explain the Value of Looking Beyond Quarterly Results

by Claribelle Deveza October 28, 2019

Tesla-Gigafactory-3-TSLA

Billionaire investor Ron Baron admitted he’s never sold a single Tesla (NASDAQ: TSLA) stock since he started investing in the electric car company. During an interview with CNBC’s Squawk Box, Baron talked about the future of Tesla. 

Baron gave the Squawk Box host some long-term investing perspective after she mentioned TSLA shorts were still up 11 percent since the beginning of the year despite losing billions due to the Q3 2019 earnings results. Baron eludes to the fact that investing in Tesla means seeing past the company’s earnings within a moment in time. 

In an interview with CNBC, Pierre Ferragu—an analyst for New Street Research—described how much Tesla has changed in just seven years. He bravely stated that Tesla has no competition in the electric auto business due to the company’s continuous effort to optimize and become more efficient. 

“I think nobody’s close [to Tesla] to be honest…Today in what manufacturers have on the road or have announced, nothing is matching the 2012 Tesla Model S, and the Model S today is actually 40 percent better than 7 years ago. So that’s how Tesla turn[ed] from being a disruptive innovator 7 years ago to actually an industry leader,” he said.  

Cathie Wood, CEO of ARK Invest, added to Ferragu’s statement and brought up Tesla’s potential leading position in the autonomous transportation service market during the same interview. According to Wood, the gross margins for autonomous transportation as a business is predicted to be in the 80s. 

According to ARK analyst James Wang, who previously worked at Nvidia, Tesla has an AI chip that is four years ahead of any competitor’s on the autonomous market, argued Wood. Furthermore, Tesla has 10 to 12 billion miles worth of real-world driving data in its arsenal, she added. Tesla’s AI chip, paired with its massive driving data, puts it at the forefront of the autonomous transportation service business. 

In general, Ferragu and Wood’s analyses seem to come to the same conclusion: Tesla is ahead in the electric car sector right now and may lead the auto industry in the future-- it's just a matter of when. Baron seems to have a similar mindset. During his interview with Squawk Box, he discussed Tesla’s Fremont factory and Gigafactory 3. According to the billionaire investor, producing cars in China will be about 60 to 70 percent cheaper for Tesla than it is in the US. He also predicted Tesla would earn more from vehicles made in Gigafactory 3 compared to cars produced in the United States. 

Gigafactory 3 is a combination of Tesla’s Fremont factory and Gigafactory Nevada. It is capable of building cars and batteries in one site. Gigafactory 3 seems to be built with all the knowledge Musk and the other executives have gathered from their previous failures and successes, so it might run smoother. 

During the Q3 2019 earnings call, Elon Musk shared that he expects Gigafactory 3 to do three times more than Fremont. The Squawk Box host quipped about how often Musk overpromises and underdelivers after she heard Musk's expectations. Baron’s answer encompasses all that Musk is, all that Tesla is, and why TSLA bulls are steadfast and loyal. 

“No. He always delivers. He doesn’t deliver on time. He always delivers, just not on time, so far,” Baron corrected. 

China might play an important role in Tesla’s future. Gigafactory 3 is ahead of schedule at the moment, and it might actually be time for Musk and Tesla not only to deliver but deliver on time as well.