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For Tesla stock to be worth the money, investors have to believe its more than just a car company.
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Tesla stock isn’t cheap when considering the potential for its car business alone. That shouldn’t surprise anyone.
That’s the conclusion from Piper Sandler analyst Alexander Potter. Still, he’s a Tesla (ticker: TSLA) bull, rating shares at Buy with a $280 price target. That’s more than 25% higher than the current market price.
It isn’t hard to see his point. Tesla stock is worth some $680 billion. That’s almost three times the market capitalization of
Toyota Motor
(TM), the second-most-valuable auto maker on the planet, and one of its largest and most consistently profitable.
Toyota American depositary receipts trade at about nine times estimated calendar 2024 earnings. Tesla stock trades at 45 times. Tesla, of course, has been growing much faster. Unit sales are expected to hit about 1.8 million in 2023, up roughly 40%. Toyota sales hover at around 10 million units a year. Even if Tesla sold 10 million units a year, it would still be valued at about $68,000 per vehicle, as opposed to about $485,000 per vehicle sold over the past 12 months. Toyota is valued at about $24,000 per vehicle sold.
Tesla looks like a growing—and expensive—car company, but it’s more than that. “In our view, new revenue streams are a core aspect of the [stock] thesis, hence our price target of $280,” Potter wrote in his Monday evening report.
Tesla also sells solar panels and battery-storage products for residential consumers. It sells utility-scale battery-storage products, too. Tesla also sells driver-assistance software for up to $15,000 per vehicle. Selling a software-based product for that amount is unique in the passenger-car business. Tesla also has moonshot, AI-driven robot, Optimus, which CEO Elon Musk believes could one day be the most valuable part of Tesla.
“So my prediction is that Tesla’s…majority of long-term value, will be Optimus,” said Musk at his company’s annual shareholder meeting in May. “And that prediction I am very confident of.”
Potter also sees opportunity in things such as heat pumps for homes. Tesla vehicle HVAC systems use heat pumps, and they’re more efficient than conventional heating and cooling technologies.
The analyst values the car business at $135 a share, or about $430 billion—almost twice the market value of Toyota equity. Potter values the rest of Tesla at $145 a share, or about $460 billion, for all the other stuff, including software and energy storage.
Potter’s price target of $280 is among the higher estimates on Wall Street, according to FactSet. The highest price target is currently $300 from New Street Research analyst Pierre Ferragu. The average price target is about $192.
Overall, about 50% of analysts covering Tesla rate shares at Buy. The average Buy-rating ratio for a stock in the
S&P 500
is about 53%.
Tesla stock is down 1.8% in Tuesday trading. The S&P 500 and
Nasdaq Composite
are down about 0.1% and 0.2%, respectively. Despite today’s performance, Tesla stock is up about 40% over the past six weeks, compared with a 5% gain in the S&P 500.
In addition to Potter’s note, Tesla investors are digesting wholesale data from China. Tesla produced about 78,000 vehicles in China in May, according to industry data providers, up from about 76,000 in April.
Wall Street expects Tesla to deliver about 445,000 units in the second quarter, up from 423,000 in the first quarter. About half of that 445,000 number will be produced in China.
Write to Al Root at [email protected]
Source: https://www.barrons.com/articles/tesla-ev-stock-toyota-37eb0e4f?siteid=yhoof2&yptr=yahoo