Bill Gurley on Tesla: Optionality or Bubble?

Bill Gurley and Tesla: An Investment Vision Beyond Electric Vehicles

Bill Gurley is a prominent figure in the venture capital world, renowned for his early bets on companies that have become household names, such as Zillow, OpenTable, and Nextdoor. However, his most celebrated investment remains his early backing of Uber Technologies, when the company was still striving to establish the credibility of its ride-hailing business model. In hindsight, Uber's success might seem inevitable. Yet, at the time, many skeptics dismissed the company as merely a digital taxi service. In contrast, Gurley recognized its greater potential: the optionality to evolve into a platform beyond ride-hailing and expand into adjacent services, ultimately reaching broader consumer demographics worldwide. It is this ability to identify transformative opportunities from afar that makes Gurley's recent remarks about Tesla (TSLA) so noteworthy.

What Did Bill Gurley Say About Tesla?

Gurley recently engaged in a discussion on X (formerly Twitter) to defend Tesla against the assertion that its valuation is a bubble waiting to burst. He pointed out that equity valuation models, such as the discounted cash flow (DCF) model, include the concept of "optionality," representing the probability of a company's success in new endeavors. He asserted that Elon Musk excels above all others in this dimension.

Why Is This Important for Tesla Investors?

By highlighting Tesla's optionality, Gurley draws a parallel to the kind of platform potential that underpinned his success with Uber. The comparison is striking, considering Tesla and Uber can currently be viewed as fierce competitors in the mobility market. Gurley's acknowledgement of Tesla's ambitions beyond electric vehicles and energy storage signals that he sees its so-called moonshot bets as worthy of consideration. In effect, he may be suggesting that Tesla's innovation pipeline extends far beyond the confines of traditional competition, underscoring the idea that overlooking these opportunities could be a costly mistake in the long run.

Is Tesla Stock a Buy Now?

For investors, Gurley's observation carries important implications. He reframes the narrative around Tesla as being more than just an automotive manufacturer, but rather a more diversified platform spanning multiple ventures. Tesla's expanding price-to-sales (P/S) and price-to-earnings (P/E) multiples suggest that the market is struggling to assign appropriate values to its emerging businesses, given that the company has yet to meaningfully commercialize them. In short, a portion of the anticipated upside from initiatives like robotaxi and Optimus already appears priced into Tesla's valuation despite their limited traction today. With that in mind, some investors may choose not to follow the clear momentum pictured above. Still, Gurley implies that Tesla should be valued less in line with capital-intensive car or energy companies and more as a technology-driven growth enterprise. Ultimately, Gurley's comments underscore the hidden multiplier potential that Tesla's optionality provides in its valuation. Should Musk and the team execute successfully, Gurley's insights may prove prophetic -- and what looks like a frothy valuation today could ultimately appear conservative in the future. Investing in Tesla stock today comes down to your personal alignment with the very narrative that Gurley points out. If you are more risk-averse, then it's likely better to wait and see how Tesla scales its AI businesses and assess how these next-generation products move the needle for the business. By contrast, if you are a growth investor and plan to hold onto a core position in Tesla over the course of several years, now may be an interesting time to scoop up some shares, as more upside could very well be in store, as Gurley alludes.