Tesla stock: Oppenheimer says all investors focus is on FSD/AI platform

With a quarter-over-quarter recovery in vehicle sales and the reduction of inventory in the channel, Tesla (NASDAQ:TSLA) appears to be successfully executing critical strategies to maintain business health, Oppenheimer analysts said in a note.

They believe that bullish investors will highlight the strength in energy storage sales, which they project to surpass $3 billion in the quarter. Also, the potential for Tesla's Model 3 refresh and the introduction of Model 2 could help the company return to vehicle growth as it shifts to AI and Full Self-Driving (FSD) technology as its primary value and growth driver.

“We believe bears remain focused on margins and valuation while remaining skeptical of AI/FSD monetization,” analysts said.

“We believe the value of its FSD/AI platform is the key to whether shares will continue moving higher or begin to moderate again,” they added.

The investment firm continues to view Tesla as a leading technology company in FSD and AI in the physical world, however, it notes that the company’s strategy for monetizing FSD remains uncertain, and its valuation is still a topic of debate.

They expect more details on Tesla’s plans during the 2Q24 earnings call.

If Tesla continues with its current subscription model for FSD, Oppenheimer analysts project $0.60-$0.85 in GAAP EPS for every 5 million FSD users, based on a $99/month subscription fee and 35%-50% net margins. For reference, Tesla has sold approximately 6.3 million vehicles to date.

For a potential robotaxi fleet model, which would require further commercialization of driverless technology, analysts estimate $0.40-$0.90 in GAAP EPS for every 100,000 vehicles, assuming a $0.60/mile driver replacement value, 40%-60% utilization, and 35%-50% net margins.