“I continue to view Tesla not as an automaker but as a disruptive technology vendor”. This is what Wedbush Securities’ Daniel Ives has to say about the surprisingly impressive rise of Tesla (TSLA)’s stock price in a recent interview with CNBC.
Co-founded by the self-made billionaire Elon Musk, Tesla is an American electric vehicle and clean energy company that aims to accelerate the world’s transition to sustainable energy. Aside from electric cars, Tesla also builds infinitely scalable clean energy generation and storage products.
As of the moment, Tesla’s market capitalization is worth about as much as the other nine largest car companies combined. When asked about choosing between Tesla and Apple (Apple targets car production by 2024), Dan said it all can be decided on each company’s Enterprise Value (EV). Dan has a very bullish outlook on Tesla despite all the selling news on the S&P. He said it was a no brainer to be bullish when asked if the people may react negatively to Tesla’s sky-high valuation because Tesla continues to deliver a golden age for its EV both domestically and in China. He also expects Tesla’s EV to ramp from -3% of total auto sales today to 10% by 2025 and that the dynamic demand will disproportionately benefit Tesla.
Due to the semi-lockdown, Dan said that this event can be a short term constrain in terms of overall sales since people can’t go anywhere for the next 3-6months. Looking ahead to 2021, 250,000 units are estimated to roll-out especially in China. He projects a base case price target at $715 and a bull case price target at $1000.
So why does Tesla deserve to be valuable than the other top 9 global automakers even if it just represents 1% of sales and why does Tesla deserve its 1000x earnings? “It’s part of the bull-bear motional debate right now.” said Dan. He views Tesla as a disruptive technology vendor and not a mere automotive company. “You look when they can do $10 of earnings for the next 3 to 4 years and I think they are trading in a different paradigm than traditional automakers.” That is why investors value Tesla like a technology and not an automaker. “But they have to execute in 2021.” implied by Dan Ives. According to him, any trip of the shoelace for this automaker can cause a significant downside.
“Elon’s gonna Elon”. Dan was also asked if Elon Musk should be acting more corporate now that his company is in the S&P 500? He replied, in terms of profitability, Elon’s attitude towards the way he works is how they got into the S&P but we can see more maturity now as they build up in Europe. Dan also stated that the company must focus on its distribution strategy, also on its cybertruck. Meanwhile, bitcoin continues to be a focus in terms of the back and forth with their micro strategy. He added, “But there’s no doubt! There’s much more focus on Tesla and they have “more to gain” especially on being part of the S&P”.