Tesla Inc’s (TSLA) Cutthroat Competition Scares Off Analyst to the Sidelines, Apple Inc. (AAPL) to Bring $185 Billion in Revenue by 2018


Analysts weigh in on two of the tech world’s heavyweight players: Tesla Inc (NASDAQ:TSLA) and Apple Inc. (NASDAQ:AAPL), with Morgan Stanley losing confidence in the electric car giant just as Guggenheim predicts the dawning of a new Apple era thanks to a forthcoming iPhone upgrade cycle. Let’s explore why the analysts are divided:

Can Tesla Stand Up Against Apple? 

Morgan Stanley analyst Adam Jonas has backtracked once again on his bullish perspective on Tesla, wavering back and forth ever since last June when CEO Elon Musk first declared the electric car giant would be acquiring SolarCity. With a bolstered bullish case amid Tesla’s Model 3 launch and potential for its Gigafactory, Jonas was back to his confidence parade for the stock.

Yet once again, the analyst finds himself downgrading Tesla from Overweight to Equal Weight rating on shares of TSLA with a $306 price target, which implies a 3% downside from where the stock is currently trading.

Jonas notes, “We are intrigued by how many investors we speak with view Tesla’s biggest competitive risk as coming from the existing auto industry. We do not see it that way. We believe Tesla’s most important competition will ultimately come from the world’s largest, best capitalized tech firms. Many of these firms (such as Alphabet (GOOG), Apple (AAPL) and others) are already testing fully autonomous vehicle fleets on public roads.”

Moreover, the risk rolls on back of what Tesla’s competitors can offer should they  broach the same market, as the analyst highlights, “One of the biggest concerns we have about the ‘end-state’ of shared mobility from a Tesla perspective is the risk that other firms could enter the market as a competitor, offering the mobility service from, say, New York to Boston or from Santa Monica to LAX at a loss… just to get access to your time and data… the chance to monetize your journey for paid search or to sell you content.”

Ultimately, Jonas leaves it up to investors with a pointed question: “Apple […] may not want to make a car for the sake of getting into transportation. Apple may want to turn your car into a mobile Apple store. You see the difference?”

Tesla will need to out-innovate in a vastly changing tech world, and Jonas needs to see more to become bullish as he once was.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Adam Jonas is ranked #424 out of 4,572 analysts. Jonas has a 52% success rate and yields 12.3% in his yearly returns. When recommending TSLA, Jonas realizes 31.1% in average profits on the stock.

TipRanks analytics show TSLA as a Hold. Out of 18 analysts polled by TipRanks in the last 3 months, 5 are bullish on Tesla stock, 7 remain sidelined, and 6 are bearish on the stock. With a loss potential of nearly 15%, the consensus price target stands at $270.71.

Apple to Bring $185 Billion in Revenue by 2018

Guggenheim analyst Rob Cihra says “A is for Apple; A is also for ASP,” arguing that the key to this tech giant’s massive success throughout the past ten years can be attributed to the average selling price (ASP) of its iPhone- and not as investors might believe to be units. As such, wagering ASP is in fact the giant’s “biggest upside drive to Apple’s economics,” the analyst reiterates a Buy rating on AAPL with a price target of $180, which represents a just under 16% increase from where the shares last closed.

Continuing to be more confident than consensus for 2017 by $0.10 this year, but more bullish by $0.30 for next year, and another $1.20 shooting past consensus in expectations by 2019. Cihra assesses Apple is already riding momentum, up 34% year-to-date and up 7% in the S&P 500, and explains, “[…] we see Apple approaching more than just a 1-year but rather multi-year iPhone upgrade cycle as its aging installed base is met by new technologies. The other key to upside is we continue to forecast meaningful iPhone ASP increases to >$730 in CY18E […] with the iPhone’s ASP rising as it consumes more functionality (and users’ time) and its premium is supported by Apple’s high-end demographic and power of owning its own unique OS.”

Therefore, “Instead of iPhone ASPs declining in a classic deflationary hardware pattern like the 7% per year PCs did during their primary growth years, iPhone ASPs have rather increased in 6 of the 10 years since introduction, with our analysis suggesting that ASP difference is now worth $88B or 60% of Apple’s iPhone revenue in FY17E. Lower prices might have driven more unit sales elasticity, but we think iPhones rather pushed their deflation into those standalone devices they consumed,” Cihra concludes, projecting revenue will reaccelerate 10% year-over-year to $153 billion by the end of this year, rising another 21% year-over-year to $185 billion next year, soaring on “pent-up demand” for the next iPhone era.

According to TipRanks, four-star analyst Rob Cihra is ranked #754 out of 4,572 analysts. Cihra has a 59% success rate and earns 10.6% in his annual returns. When recommending AAPL, Cihra garners 37.0% in average profits on the stock.

TipRanks analytics demonstrate AAPL as a Strong Buy. Based on 32 analysts polled by TipRanks in the last 3 months, 26 are bullish on Apple stock, 5 remain sidelined, and 1 is bearish on the stock. The 12-month average price target stands at $162.04, marking a 4% upside from where the stock is currently trading.

  • joeinslw

    If they lower the tax from 35% to 15% like President Trump wants, I can see that 185 Billion come back from overseas, but if Congress doesn’t lower that tax, it’s just talk !