'TaaS 2.0' event on Thursday; My Tesla e-mail list; Ford, GM, and Volkswagen Shares Are Hot. Thank EV Mania; EV Fever Spreads to Europe; Rob Arnott Warns of 'Big Market Delusion' in EVs; ARK's Tesla model; Tesla Crash Probed; Musk: 'I don't ever give up'; Lordstown Motors

While I have conflicting feelings about Tesla (TSLA) and its mercurial CEO Elon Musk, I'm super bullish on electric vehicles ("EVs") and autonomous vehicles ("AVs"), for reasons I lay out in this video.

In it, I share our biggest idea here at Empire Financial Research: The rapid development of EVs and AVs will lead to an entirely new industry called "TaaS" – "Transportation as a Service."

I think TaaS will transform life as we know it – from the way we eat to the way we shop, work, and travel. This future is coming sooner than almost anyone expects... and is already minting many new millionaires in the process. According to Bank of America (BAC), TaaS could attract $2.5 trillion in investments over the next decade.

The five TaaS stocks we recommended to our Empire Stock Investor subscribers on February 5, 2020, have soared an average of 60% versus only 18% for the S&P 500 Index. But my colleague Enrique Abeyta and I believe this sector has a lot more room to run...

To hear our latest thinking, tune in this Thursday, March 25, at 8 p.m. Eastern time for a special event where we'll reveal a new TaaS opportunity you can act on.

We're calling this "TaaS 2.0."

This event is totally free to join – all you need to do is register right here.

Make sure to tune in... because attendees will receive something special as a thank-you for watching.

P.S. For folks who share my interest in this burgeoning sector, I have a Tesla/EV/AV-focused e-mail list, which you can subscribe to (roughly two e-mails per week) by sending a blank e-mail to: tsla-subscribe@mailer.kasecapital.com. Below is what I sent to that list recently...

1) We recommended Volkswagen (VOW3.DE) in our Empire Stock Investor newsletter earlier this month, and it's already jumped 26% as investors are starting to wake up to the absurd valuation disparity between Tesla and other automakers (you can learn more about Empire Stock Investor right here). From the Wall Street Journal: Ford, GM, and Volkswagen Shares Are Hot. Thank Electric-Vehicle Mania. Excerpt:

Investors are piling into a long-neglected sector: old-school car makers that are reinventing themselves as electric-vehicle producers.

After years lamenting that their shares were undervalued, Ford Motor (F), General Motors (GM), Volkswagen and other blue-chip car manufacturers are experiencing sharp share-price gains this year as they embrace the new technology.

Ford is up 42% so far this year, while GM's shares have also surged 42%. VW's stock is up 46% and even briefly rose 29% in intraday trading one day this week when the company held a "Power Day" event, saying it would build six EV battery factories in Europe alone over the next 10 years. VW has this week also pushed ahead of SAP to become the most valuable stock on the German DAX index.

By comparison, the S&P 500 index is up just 4.2% so far this year.

The new infatuation with established auto makers, many of which have been in business for more than a century, follows an earlier rush into electric-vehicle stocks that has driven shares of Tesla and other electric-vehicle and battery manufacturers into territory that some analysts say is reminiscent of the dot-com bubble of the 1990s.

Conventional auto makers have long stewed in the shadow of Tesla, whose market capitalization remains twice that of VW, GM and Ford combined. But as the incumbents deepen their commitment to electric cars, they are beginning to persuade investors that they are serious about turning away from fossil fuels and embracing green technology.

2) Here's a related article: Electric-Vehicle Fever Spreads to Europe. Excerpt:

The U.S. stock-market craze for all things to do with electric vehicles is showing its first signs of crossing the Atlantic.

Volkswagen's preference stock, the form of VW equity traded by most investors, has risen 16% this week to a six-year high. The company, which vies with Toyota Motor (TM) for the title of world's largest auto maker by sales, unveiled Monday a new battery strategy resembling that of Tesla. On Tuesday, Chief Executive Herbert Diess pledged to harness VW's scale by standardizing batteries, software, production and services across its brands, which include Audi and Porsche as well as VW itself.

The German giant finally seems to be enjoying some of the attention lavished on U.S. and Chinese EV specialists, and on some traditional U.S. car makers, notably General Motors, that have bet big on new technology. There was little data to back up the share moves, just plenty of ambition. This isn't the world of the efficient markets hypothesis – rational calculations of future profits – but one of hope and hype in an industry whose future has become highly unpredictable.

Mr. Diess is unlikely to complain: He has repeatedly weaponized Tesla's soaring market value to prod VW managers into a more rapid execution of his transition strategy. And a frothy stock price is a competitive advantage in an industry dependent on big capital spending. Tesla raised $12 billion last year by selling shares.

BMW also has learned the lesson. It made a raft of EV-related announcements Wednesday, including that at least half of its vehicles would be fully electric by 2030. The shares rose 5% in morning trading.

3) As I noted above, I'm super bullish on EVs and AVs, but fund manager Rob Arnott is almost certainly correct when he argues that the major EV companies, as a group, can't possibly grow into their enormous combined valuation, so investors will need to be smart and selective: Rob Arnott Warns of 'Big Market Delusion' in Electric Vehicles. Excerpt:

The electric-vehicle craze is a classic sign of a "big market delusion" that has entrapped investors throughout history, according to quant pioneer Rob Arnott.

The 600% rally in a year that sent the combined value of eight manufacturers to $1 trillion is pricing every firm as a major winner in the clean-energy boom.

Yet just as the once-highly valued PalmPilot lost in the smartphone revolution, not all of them will succeed in the EV age, the Research Affiliates chairman co-wrote in a new paper.

"All of these companies are priced as if they are going to be huge winners, but they are competitors!" Arnott said alongside Lillian Wu, a researcher at RA, and Bradford Cornell, a finance professor at the University of California, Los Angeles. "They cannot all assume dominant market share in the years ahead!"

4) Last Friday, Tesla bull ARK Invest published this update to its model: ARK's Price Target for Tesla in 2025.

Financial Times columnist Jamie Powell heaps scorn on ARK Invest's model: ARK's Tesla model gish gallops to $3,000 per share. Excerpt:

On Friday evening ARK Invest, the tech focused investment manager and ETF provider du jour, published its latest update to its Tesla model. The new 2025 price target? $3,000 per share, or a market capitalization of just under $3tn. The bull case is a touch higher, of course, at $4,000 per share. The bear case is $1,500 per share, more than double where Tesla's shares closed before the weekend.

Accompanying the blog post was an Excel sheet uploaded to GitHub, which you can download and toy with here. The "model," as with the last iteration, has more logical holes than Blackburn, Lancashire (Editor – that's a nod to one of the lyrics in the Beatles' A Day in The Life, right?). To be frank, it's hard to know where to start, but here's a few noticeable details from the bull case.

To start, ARK forecasts that Tesla's almost non-existent insurance business could generate revenues of $6bn by 2025, with 40% operating margins, more than three times the margins of auto insurance heavyweight Progressive.

Somehow, we are led to believe, it might manage to do this without having to meet the regulatory capital requirements that are de facto part of the business. In fact, ARK doesn't even think the company will need to raise equity at all in the next five years, despite it modelling production of 10.6m cars in 2025 – almost 21 times 2020's run rate. Then there's the simple discrepancy that, for some reason, Tesla's cost of debt in the bull case is 8%, double the cost in its bear case. Oh, and ARK's 2025 share count is plugged in at 964m, more than 1 million shares below Tesla's current fully diluted share count of 1.08bn according to its latest 10-K. You might also spot ARK has Tesla's working capital requirement remaining flat at $12.5bn over the next five years, even as it forecasts its electric vehicle revenues to grow from $26bn to $367bn. Did someone also forget to include a profit and loss statement, a balance sheet or a cash flow statement? And note, we haven't even mentioned robo-taxis.

FT Alphaville could go on in more detail. But as with any gish gallop fully debunking ARK's model would have taken a week of painstaking work and tens of thousands of words, which, by the time it had generated the news headlines it almost definitely knew it would (and has), would be utterly pointless. ARK's target audience – the humble retail investor – probably wouldn't have cared either way. So why bother?

To that point, the model seems to have done the trick. In pre-market trading, Tesla's shares are up a touch over 4% to $681.

So instead, perhaps it's best just to sit back and enjoy the ARK spectacle as a sign of the times. Where arguably the most influential investment manager of the past five years seemingly feels comfortable publishing featherweight analysis on its largest position in the knowledge that, by and large, it'll be swallowed hook, line and sinker by all and sundry.

What a world, eh?

5) Tesla's recklessness may be catching up with it. Its Autopilot/Full Self-Driving is great technology, but the company has dangerously oversold it... Tesla Crash Suspected of Involving Autopilot Draws Probe. Excerpt:

Some safety advocates and other auto experts have criticized Tesla as not doing enough to prevent drivers from relying too heavily on the driver-assistance system or using it in situations for which it isn't designed. They have also said that the term "autopilot" can give drivers a false sense of confidence in the abilities of the system, which helps with functions such as steering and matching a vehicle's speed to that of nearby traffic.

"For multiple years now, Tesla has been making available on its vehicles an active driving assistance system that does not put safety first," said William Wallace, Consumer Reports' manager of safety policy.

Tesla's Autopilot came in first for capability and performance in a 2020 Consumer Reports ranking of 17 advanced driver-assistance systems, receiving a score of nine out of 10. The system performed poorly in the category of keeping the driver engaged, earning a score of three.

6) This one-minute video clip captures a very poignant moment:

7) Lordstown Motors (RIDE) fell 14% on Thursday on this news: Lordstown Motors Says It Is Cooperating with SEC Inquiry. The CEO went on CNBC that day and lied his a** off – just watch him bob and weave... Here's Muddy Waters' tweet about it:

Best regards,

Whitney