Elon Musk: The man with the golden gun
Abraham George Market Musings
Tesla investors are having a ride of their life. In less than three months the stock is up 60%. Above all, it has joined the elite market cap club of over a $1 trillion dollars along with Alphabet (Google), Apple, Amazon, Microsoft and Facebook. It is not even one year since it became part of the S&P 500. It isn’t part of the Dow though it clearly deserves to be there, when it’s market cap surpasses the market cap of all the auto companies put together and is an industrial scrip that has so much impact on the general economy. I think Tesla should be the fastest to a $1 trillion market cap.
So, what triggered this sudden rise in Tesla? It rose 14% yesterday. The rental car company Hertz global (HTZZ) has decided to go electric. In its first move toward electrifying its fleet of rental vehicles, they placed an order for 100,000 electric vehicles (EV’s) from industry pioneer and leader Tesla. This order marks the single biggest largest purchase for EV’s. It represents an estimated $4.2 bio revenue for the car maker and is equivalent to one-tenth of what Tesla currently produces in a single year.
This could be a huge game changer in the future trend for transportation. Tesla will make and supply Model 3 sedans that Hertz will make available for rent in the US and Europe in the last quarter of 2022. Drivers will have access to Tesla’s current charging infrastructure, and Hertz also has plans to build out its own network of chargers. This deal further widens Tesla’s lead with other EV producers like GM, Ford and Toyota. Hertz’s CEO Paul Stone said that they chose Tesla because they are the only manufacturer that can produce EVs at scale.
There is a community of hardcore Tesla haters who are short Tesla. They should be bleeding further but out-of-the-box thinkers like Cathie Wood who has continued to show tremendous faith and confidence in Tesla and its mercurial and enigmatic entrepreneur Elon Musk must be laughing all the way to the bank.
Elon Musk is an unique entrepreneur who creates his own luck here on earth and in outer space. He is the man with the golden gun and hardly misses his targets.
What else is he up to? His underground boring company just received approval from Nevada’s Clark county Commissioners to establish and maintain an underground transportation system under Las Vegas. There is nothing impossible with this man and he is willing to take big risks. Be it reputational or economic. If you have been to Vegas, one can visualize what he is up to with this underground transportation system. The Vegas Loop will link the convention center to the Casinos along the strip, the McCarran airport, the stadium and down town Las Vegas. And the longer term plan is to link the entire system to Los Angeles.
In Vegas there will be 29 miles of tunnels, 51 stations, and the capacity to support 57,000 passengers per hour. But this is the biggest take away. No taxpayer money will be used for this project.
Unbelievable! It’s almost unheard of for something of this scale that looks like a public works project. But based on demonstrated success to date, Musk and his boring company is able to pull this off by raising money from private and public investors. They have already given guidance on the price structure. It’s going to be much faster, better, safer and cheaper than a taxi.
Tesla may not be a great buy with almost 23 times to sales at current prices but it should surely be part of a retirement fund to hold at some stage.
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Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.