Why Altimeter’s Brad Gerstner Just Bet Big on TSLA Stock
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Since yesterday, Tesla (NASDAQ:TSLA) stock has been trending more than usual on social media. Behind the buzz is a conversion of a famous investor — Altimeter Capital’s Brad Gerstner — from a Tesla bear to a Tesla bull and his decision to buy a stake in the iconic electric-vehicle (EV) maker.
Background on Gerstner
Gerstner is the founder and CEO of Altimeter Capital, which had $18 billion of assets under management in April. Among his highly profitable early-stage investments have been Snowflake (NYSE:SNOW), Okta (NASDAQ:OKTA), and Bytedance, the owner of TikTok. Gerstner has reportedly “participated in 100 IPOs as an anchor, sponsor and investor.”
The Rationale for Gerstner’s Change of Heart on Tesla
In 2019 and 2020, the investor was worried that Tesla was “undercapitalized,” and he even feared that it could be forced to declare bankruptcy.
But now, the automaker has more than enough funds to be successful, and the world has become much more dedicated to the EV revolution, Gerstner explained. As a result, the EV market is growing very rapidly, he noted.
What’s more, although the investor does not expect Tesla’s share of the EV market to increase much above its current level of 15%, he predicts that its share of the sector’s profits will be much higher than 15%.
In that way, Tesla will emulate Apple (NASDAQ:AAPL), whose iPhones generate a majority of the smartphone sector’s profits, even though they represent a much smaller portion of the space’s sales volumes, Gerstner explained.
TSLA Stock by the Numbers
Currently trading at a forward price-earnings (P/E) ratio of about 50, TSLA stock has dropped almost 4% in the last month but gained 30% in the last three months.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.
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