Market Value of Electric Vehicle Builder Tesla Defies Gravity

January 20, 2020 by Jerry Hirsch, @Jerryhirsch

What to make of Tesla, its crazy high share price and its unique products like the all-electric Cybertruck?

Well, let’s start with the share price. Tesla shares closed at $510.50 on Friday, giving the company a market cap – stock market valuation – of $92 billion. That’s massive. It is bigger than the value of General Motors and Ford combined.

“The bull narrative seems to have shifted from Tesla disrupting multiple industries (solar/battery storage, robotaxis and autos) to Tesla being a profitable and growing next-generation auto OEM,” Brian Johnson, the auto industry analyst at Barclays, said in a recent report to investors.

A chart from Alexander Potter, the analyst at Piper Sandler Research, outlines one of the factors driving that narrative.

MODEL 3 SUCCESS

Tesla’s Model 3 captured an 18.9 percent share of the luxury sedan market in the last quarter of 2019. That’s three times the share of BMW’s iconic 3-Class and four times the share of the Lexus ES 350.

“If Tesla’s Model 3 market share in the United States can be replicated in China – and if this logic also extends to Model Y – then Tesla’s annual volume in China alone would eventually exceed 650k units,” he wrote in a report to investors.

The Model Y – a compact crossover – comes out later this year and addresses a significant gap in Tesla’s line up. Compact crossovers are rapidly growing in popularity globally and trail only pickup trucks as the most purchased vehicles in the U.S.

“We’re not sure Tesla can immediately replicate its U.S. success in China, due to the strength of German brands in China, but we are increasing our estimates nonetheless,” Potter said. He sees Tesla selling 400,000 vehicles annually in China by 2022.

CONFLICTING SHARE TARGETS

Potter’s Tesla price target is $553, putting the company’s valuation at well over $100 billion.

But Johnson is far more skeptical. His Tesla price target is $200. Johnson just isn’t convinced Tesla can transition into a profitable automaker.

“We believe the shares are sharply overvalued as an OEM and reiterate our $200 price target,” he told investors.

Just as there are widely differing opinions about Tesla as an investment, the angular, futuristic Cybertruck is also polarizing.

Market research firm Piplsay surveyed consumers and found many don’t like the styling.

Not everyone is familiar with the truck, but of those who have seen it, 44 percent said it looked like another rich boys’ toy or expressed some other form of disinterest. One of the issues is the size of the vehicle. Asked if they would like a smaller version, 46 percent of the respondents said yes.

But Tesla says it has at least 250,000 pre-orders for the truck, which the automaker plans to start building late next year. Although not all of those will turn into sales, it is a good gauge of initial interest in the truck.

John O'Dell November 25, 2019
Tesla's planned "Cybertruck" will be polarizing because of its looks and isn't likely to cut into Detroit's dominance of the pickup truck market, auto industry analysts told Trucks.com.

One Response

  1. Laadpalen

    German brands have taken control in China and South Asia for the last 2 decades. It is gonna be tiugh task for Tesla to compete with them and see bigger numbers in China.

    Reply

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