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
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.