Tech enthusiast and research analyst Gene Munster is out putting all his conviction behind Tesla Inc (NASDAQ:TSLA) and its game-changer mass market Model 3 ahead of the launch, predicting that even with a leisurely roll-out, Tesla remains ahead of the game; a.k.a. watch out Toyota. Meanwhile, with a less bullish note enters KeyBanc’s Andy Hargreaves, who is not all cheers for Apple Inc. (NASDAQ:AAPL) ahead of its iPhone 8 launch with fingerprint sensor challenges running amiss. Let’s take a closer look:
Everyone Wants to Change the World- But Munster Says Tesla’s Model 3 Can
Gene Munster – offering a bullish take from his research-driven, venture capital firm Loup Ventures – sees a big global change coming with Tesla’s Model 3 in the coming decade, ramping up both electric and self-driving vehicle adoption alike, after a cost of ownership study shows a gilded future for CEO Elon Musk’s bread-and-butter.
Investors could be thrilled indeed, as Munster foresees, “This should propel shares of TSLA higher and, more importantly, advance us to a new paradigm in transportation, car ownership, ride hailing, city development, and energy usage. We believe we will eventually look back at the launch of the Model 3 and compare it to the iPhone, which proved to be the catalyst for the shift to mobile computing.”
In fact, the research analyst pinpoints an opportunity shattering $100 billion within the next 8 years, wagering, “If Tesla captures 25% of this 11 million vehicle addressable market by 2025, Tesla would generate $105 billion in annual revenue from the Model 3. It will likely take a few years for Tesla to ramp production; we see 2019 as the first year the company will tap into this broader market,” believing 2019 will also be the year full autonomy for Tesla roars onto the scene.
In the car arena, Munster gives the win to Tesla, believing that for barely any cost difference when weighed against a Camry (a slight 13% of difference throughout a period of five years) for an “infinitely better car,” the analyst says to look out for a “‘see it and want it’ phenomenon” to juice up Model 3 demand between now and 2020 to 2022.
True, “Profitability is a Wild Card,” admits Munster, who acknowledges, “Most investors we’ve talked to ascribe to the ‘love the product, don’t like the stock’ narrative. The most common cause for concern about owning shares of TSLA is a belief that the company has a decade of profitless prosperity ahead of it.” Investor apprehension makes sense to the analyst, particularly considering the Street’s amped up expectations angling for 5% operating margins. Yet, down the road, Munster believes these lofty expectations are achievable with operating margins potentially revving near 15%, as the electric car giant’s car-battery profitability one-two punch have consumer electronics appeal advantage- unlike “traditional cars.” At the end of the day, Munster believes long-term investors can take a sigh of relief, as Model 3 demand is soaring; something which CEO Elon Musk absolutely can use to capitalize and strengthen the company.
TipRanks analytics exhibit TSLA as a Hold. Out of 17 analysts polled by TipRanks in the last 3 months, 6 are bullish on Tesla stock, 7 remain sidelined, and 4 are bearish on the stock. With a loss potential of nearly 6%, the stock’s consensus target price stands at $298.14.
Apple Fingerprint Dilemma Could Put iPhone Unit Sales in Hot Water
Apple has a fingerprint sensor issue on its hands and a ticking time bomb of two weeks before the 10th anniversary edition model of the iPhone is supposed to launch. KeyBanc analyst Andy Hargreaves notes the tech giant could certainly back pedal on the fingerprint sensor, leaving just facial recognition in terms for users to login and authenticate the phone. Yet, while this looks more and more to be the case, the analyst deems this “far from ideal,” and apprehensively points to delay risks in store.
In reaction, the analyst reiterates a Sector Weight rating on shares of AAPL without listing a price target. (To watch Hargreaves’ track record click here.)
Hargreaves is not confident on the prospects ahead, spotting a rise in “risk to unit sales and mix for the cycle.” Anticipating a usual three-month fix for fingerprint IC orders to translate to whole volume iPhone production status, should the giant be able to resolve its issues by August, volume production could be hit by the end of October or start of November. This would be suitable for AAPL from both a consumer and investor standpoint, argues Hargreaves, but the question mark continues to hang in mid-air: Can Apple get its fingerprint sensor in working condition by the iPhone 8 launch? To the analyst, it is “entirely unclear” at this point.
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“We believe Apple’s facial recognition solution should work from many angles and in low-light environments. However, it would not work without clear line of sight to the user’s face. Even if this encompassed just 5% of login scenarios, it would mean that several times a day the new iPhone would perform worse at an elemental feature than older iPhones, which would risk pushback from consumers. Further, we do not believe facial recognition would be initially qualified as an acceptable verification method for Apple Pay. While Apple could achieve this over time, the likelihood for an initial lack of Apple Pay could adversely affect demand,” opines Hargreaves.
Ultimately, Hargreaves concludes, “A delay up until mid-November would not likely have a meaningful impact on our expectations for the cycle. Beyond this, we would expect mix and total unit volume for F2018 to be meaningfully affected.”
TipRanks analytics show AAPL as a Strong Buy. Based on 30 analysts polled by TipRanks in the last 3 months, 24 rate a Buy on Apple stock while 6 maintain a Hold. The 12-month average price target stands at $165.04, marking a nearly 14% upside from where the stock is currently trading.