Why Tesla stock can still hit $500
Talk about insanely bullish on high-end electric cars.
Berenberg auto analyst Alexander Haissl dropped the mic Friday on what has been another good week for Tesla stock fanatics. The long-time Tesla bull reiterated his Buy rating on Tesla’s stock and hearty $500 price target.
Tesla’s (TSLA) stock still only trades at $213, despite a 17% rally so far in June.
One has to hand it to Haissl, he makes a compelling case for Tesla hitting $500 a share. “Demand worries are overblown, as the Q1 volume weakness was largely self-inflicted by logistic problems, uncertainty about store closures and changing pricing structure, and not indicative of the underlying demand situation, in our view,” wrote Haissl.
“However, the demand debate is likely to remain an “on paper” battlefield between bulls/bears and will only be resolved once hard facts are reported, as management is given little credibility for any reassuring commentary,” Haissl added. “Easing demand concerns will have a multiplier effect on the stock, as the market will increasingly price in the potential from Tesla’s new China plant and its autonomous vehicle (AV) technology, which at this point is largely dismissed. Demand support could ironically come from legacy car makers’ increased electric vehicle (EV) marketing activities, as consumers ultimately discover Tesla’s more competitive offering, on both technology and price.”
His super bullish investment thesis is emboldened by Tesla’s generally upbeat annual shareholder’s meeting this week. CEO Elon Musk sounded confident in the demand for the Model 3 (key issue that has the stock down 35% this year) and hinted at its hyped electric pickup truck hitting the market within 12 months.
Musk also said the Tesla semi truck would start production later in 2020. Wedbush analyst Dan Ives, who recently became more bearish on Tesla’s stock, told Yahoo Finance he isn’t sure how Tesla will be able to profitably make electric semi trucks.
After all, the company has a lot on his plate just to make money from cars.
Berenberg’s Haissl certainly puts a time-frame where his mouth is when it comes to financial projections, too (which of course underlies the aggressive price target). Haissl sees the money-losing Tesla earning $2.22 a share in profits this year. By 2020, he expects profits to explode to $13.31 a share and then reach $24.93.
A reason to be skeptical about Tesla
Any sane investor should view the projections by Haissl with heavy skepticism. Not only does Tesla frequently miss its financial targets, but hasn’t shown it could deliver consistent profits. Moreover, to discount the looming competition in the electric car category from Ford (F), General Motors (GM), Jaguar and Audi could prove foolish.
All three of these bigger automakers — and others like Nissan — have their sights set on exploiting the electric car opportunity. Some already have very solid electric offerings in the marketplace doing battle with Tesla’s Model 3 and Model S.
“I think Elon Musk is perhaps one of the most brilliant executives on the face of the planet today. But can he run a multibillion dollar company? That’s the challenge,” chief investment strategist Keith Fitzgerald at Money Map Press said on Yahoo Finance’s The First Trade. You have competition all over the place. You have lawsuits. You have management challenges internally. To me that smells trouble.”
Brian Sozzi is an editor-at-large and co-host of The First Trade at Yahoo Finance. Follow Brian Sozzi him on Twitter @BrianSozzi
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