Elon Musk wants believers only.
The Tesla (TSLA) CEO stated his case clearly during the electric vehicle maker's recent quarterly conference call when he addressed the subject of autonomous driving.
"I recommend anyone who doesn't believe that Tesla would solve vehicle autonomy should not hold Tesla stock," he told analysts on July 23. "They should sell their Tesla stock. If you believe Tesla will sell autonomy, you should buy Tesla stock."
Musk added, "I still find that most people actually don't know how good the system is."
"And I would encourage anyone to understand the system better to simply try it out and let the car drive you around," he said. "Once people use the system, they tend to continue using it. So, it's very compelling. And this, I think, will be a massive demand driver, even unsupervised full self-driving will be a massive demand driver."
Related: Top analyst defends Tesla stock price target despite earnings slump
Of course, believing in Musk's vision of an autonomous vehicle future takes a bit of patience.
In 2016, he stated in his Master Plan, Part Deux, that "you will also be able to add your car to the Tesla shared fleet just by tapping a button on the Tesla phone app and have it generate income for you while you're at work or on vacation."
And then in 2019, Musk declared that "next year, for sure, we will have over one million robotaxis on the road," which sort of didn't happen.
During the recent call, Musk addressed the postponement of the debut of its robotaxi from next month to October 10, telling analysts, "I wanted to make some important changes that I think would improve the vehicle."
"Moving it back a few months allowed us to improve the Robotaxi as well as adding a couple of other things for the product unveil," he said.
Despite the hiccups, the potential for full self-driving hasn't been lost on analysts, some of whom recently rebooted their Tesla stock outlooks because of it.
Analyst cites reviews of 'revolutionary' tech
TheStreet Pro's Ed Ponsi wrote on July 26 that "Tesla’s earnings came up well short of estimates, and a contraction in gross margins was concerning."
"But investors reacted positively to the Austin, Texas-based EV manufacturer’s conference call, much of which focused on areas other than EV sales," he said.
Related: Analysts race to reset Tesla stock price targets after earnings
Tesla reported earnings of 52 cents per share, a 43% slump from the same period last year that missed Wall Street's forecast of 62 cents. Revenue rose 3% from a year ago to $25.5 billion, partly thanks to the stronger-than-expected vehicle delivery tally.
Tesla reported a gross margin of 14.6%, which not only missed Wall Street's forecast but was also the lowest overall figure in at least five years.
Ponsi said investors may be underestimating the potential impact of full self driving, noting that Stifel analysts chose to accentuate the positive by writing, “energy generation and storage revenue easily beat expectations. FSD and Robotaxi impact will be critical value drivers.”
Got FSD 12.5 on the Refreshed Model 3 today, and it truly is mind-blowing! Have been driving FSD since its beta days, and have driven almost every version and can say that 12.5 is next level stuff! @aelluswamy - thank you for this release! Kudos to the team. Extremely impressive!
— apk (@arjunprabhuk) July 25, 2024
"If you view Tesla as just an automotive company, then some negativity is warranted," Ponsi said. "If you consider Tesla an AI play, the equation changes. Now, factor in energy generation and storage, Robotaxi, Optimus, and FSD."
He noted that it is difficult to gauge how big of a role each of these will play in the future, and it's impossible to know for certain what other products may enter the mix.
"That’s what makes Tesla both exciting and a bit frightening," Ponsi said. "Analysts have the difficult task of trying to understand cutting-edge products that are still in development."
Piper Sandler said in a July 29 research note that it believes investors "have grown accustomed to ignoring Tesla's hyperbole" around full self-driving.
However, judging by reviews on X, formerly Twitter, which Musk bought in 2022, Tesla's update to version 12.5 is "revolutionary," the firm said.
"Got FSD 12.5 on the Refreshed Model 3 today, and it truly is mind-blowing!" @aelluswamy said on X. "Have been driving FSD since its beta days, and have driven almost every version and can say that 12.5 is next-level stuff!"
Another poster said that "the quickness in decision-making on this version is on another level."
Critic calls out 'broken promises'
Piper Sandler said it believes investors should consider the possibility that Tesla's decision to host a robo-taxi event on October 10 "isn't a ploy to distract from falling EV sales."
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Rather, it could catalyze a realization that full self-driving matters more than anything else for Tesla, Piper contended.
The firm said that it expects self-driving take-rates to "inflect sharply upward" starting around 2030 and that by the end of its 20-year forecasting period, Piper expects 100% fleet-wide FSD adoption for Tesla.
It also expects FSD subscription prices to eventually rise from $99 per month to over $500.
Tesla will eventually sell electric vehicles for $31,000 apiece at 0% gross margin, but ultimately, "just like cheap flip-phones, we don't think anyone will buy non-FSD cars," Piper said
The firm told investors to buy Tesla shares and kept an overweight rating on the name with a $300 price target.
There are some doubters, of course.
Dan O'Dowd, CEO of Green Hills Software, who says he's "running a campaign to make computers safe for humanity and ban Tesla Full Self-Driving," posted a video on X entitled "Elon Musk's Broken Promises" that featured a supercut of the CEO's autonomous vehicle comments dating back to 2014.
"After a decade of failure, the latest version of FSD (12.5) still ignores Do Not Enter signs and will drive the wrong way down a one-way street," he said.
Morgan Stanley named Tesla its new "Top Pick" in U.S. Autos, replacing Ford (F) . It cited a 40% upside to the firm's $310 price target, "more managed" expectations on autos and powerful emerging drivers of firm value.
However, the firm, which kept an overweight rating on Tesla shares, said it believes near-term expectations around FSD and robotaxi may be too high.
Related: Veteran fund manager sees world of pain coming for stocks
