Houke Finance: Market Update and Tesla Analysis (June 10th)
Market Overview
U.S. stock prices showed overall gains today, Tuesday, June 10th. The Dow Jones Industrial Average increased by 0.25%, the S&P 500 rose by 0.55%, and the Nasdaq Composite climbed by 0.63%. Investors are closely monitoring the progress of Sino-US trade negotiations, with optimism fueled by Trump's recent call to Xi Jinping. A positive outcome from this week's negotiations could potentially drive tariff-sensitive stocks, like Nvidia, and the broader market to break through key resistance levels.
Sino-US Trade Negotiations
CNBC reports indicate that both China and the United States have reached a trade agreement framework during high-level meetings in London. U.S. Secretary of State Rodney Rudnick stated that this framework would implement a dialogue between the Japanese-Nazi consensus and the two presidents. Chinese Representative Li Chenggang echoed this sentiment, adding that he and U.S. Trade Representative Greer will return to Washington to secure President Trump's approval. He also mentioned that China's restriction on rare earth exports to the United States is a central component of the agreement, with the U.S. expecting resolution during implementation. It is suggested that if China fully addresses CTO concerns, the United States will reciprocate by lifting restrictions on AI chipsets and software. This could be a significant boost for chip stocks, particularly Nvidia, and positively influence market sentiment.
Tesla Stock Analysis
Recent Developments and Stock Rebound
Tesla's stock price previously experienced a decline following a public dispute between Musk and Trump. However, as tensions eased and Musk removed some critical comments, the stock has since rebounded. The initial drop was deemed an overreaction to noise, not reflective of the company's underlying fundamentals.
RoboTaxi Testing
Recently, Musk shared a video on Twitter showcasing Tesla's unmanned car testing in Austin, Texas. The video features a Model Y SUV with "RoboTaxi" branding, and it operates without a safety supervisor in the driver's seat. Musk stated that Tesla plans a small-scale RoboTaxi test run of 10-20 self-driving SUVs within a limited geographic area. Bloomberg reports that Tesla intends to officially launch this service in Austin on Thursday, June 12th. While small-scale, this launch is crucial as it could shape the future of the company and its stock market performance, particularly in comparison to Google's Waymo, which already operates autonomous taxi services in several U.S. markets.
Historical Performance and Valuation
Tesla's stock saw a recent surge beginning in October of last year, partly due to the improved relationship between Musk and Trump, but primarily fueled by fundamental strength. However, the stock has struggled to regain its 2021 peak, hovering in the $200-$300 range. This stagnation is attributed to a lack of clear catalysts or speculative opportunities, especially considering the intensified competition in the global electric vehicle market and slowing economic growth.
Future Growth and Long-Term Potential
Analysts predict that Tesla's annual income growth in 2025 will be minimal (0.22%), with a rebound to 21% the following year. Despite this slower growth, investors maintain a high valuation for Tesla, indicating that they anticipate substantial long-term cash flow, potentially from businesses beyond the core car sales. Investors are particularly interested in the potential of FSD (Full Self-Driving)-driven rental car services, seeing it as a major transformation opportunity. Musk himself acknowledges FSD's importance in determining Tesla's future value.
Valuation Scenarios
A suitable valuation method is to individually assess each business and combine the valuation.
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Car Business: The car business generated $7.7 billion in revenue in 2024. Considering the market forecast, we believe that stable double growth is still very promising in the future. The valuation of this business is about 62 billion yuan.
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Energy and Energy Storage Business: With revenue of $1.1 billion and a growth rate of 67% compared to 2023, the business’s valuation is about $180 billion.
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Services and Other Income: This area contributed $1 billion with a 27% growth rate and has a valuation of $5 billion.
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RoboTaxi Business: Using Uber as a benchmark for the mature rental car business the value is somewhere between $130 and $230 billion.
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Robot Business: Valued somewhere between 40 and 100 billion.
Market Sentiment and Short-Term Fluctuations
The performance of the upcoming RoboTaxi launch in Austin will be a key factor determining short-term stock price fluctuations.
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Positive Performance: A successful launch could drive the stock higher.
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Poor Performance or Accidents: Setbacks could negatively impact the stock price.
Long-Term Investment Strategy
The investment in Tesla relies on the investor's confidence in Musk's capabilities. A belief in his ability to create an Uber-sized autonomous taxi business justifies the current stock price. However, skepticism about this venture suggests that the stock is already reasonably priced or even overvalued.
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