Altimeter Capital’s Brad Gerstner has announced a new position in Tesla Inc TSLA.
What To Know: Gerstner was bearish on Tesla in 2019 and 2020 on concerns Elon Musk’s EV business was undercapitalized and could be heading for bankruptcy.
“Fast forward two years. The world has changed dramatically,” Gerstner said Thursday on CNBC’s “Fast Money Halftime Report.”
Undercapitalization is no longer a concern and bankruptcy is completely off the table, he said, adding that there are two other contributing factors to consider.
First, the world is moving to wholesale as a result of geopolitical and energy realities we are currently facing, he said. Such has caused a shift toward electrification, but only about 8% of the market is being reached, he said.
“That eight percent penetration is going to expand probably at a CAGR of 30 to 40 percent over the next five to 10 years,” Gerstner said.
Furthermore, governments around the globe are supporting electrification efforts whether it be through investments in battery technologies or adding charging stations or passing legislation that supports the transition to electric, he said.
So Why Tesla? Gerstner believes Tesla is well ahead of the competition in the space.
“They have 30% margins. Their competitors are running 10 percent at best, and I think they have a compounding advantage in the world,” he said.
Although Altimeter Capital expects Tesla’s market share to remain steady at around 15%, that’s 15% of a “massively growing market,” Gerstner said: “And we think they are going to be a much larger percentage of the profit pool in electric vehicles, in energy storage, et cetera.”
He compared Tesla to Apple Inc AAPL, which represents a large portion of the profit pool in its space, but has a much smaller share of actual units sold, he said.
“We think Tesla is following that playbook and, you know, they’ve built a company that frankly, is extending its moat and extending its lead versus the OEMs, who are saddled with a bunch of ICE legacy,” Gerstner said.
TSLA Price Action: Tesla has a 52-week high of $414.50 and a 52-week low of $206.86. The stock was up 1.31% at $306.85 Thursday afternoon.
Photo: Courtesy of Tesla