Tesla: A Bear’s Explanation that “It’s the Dream that Drives the Stock”
Is optimism the main share driver for Tesla Inc (NASDAQ:TSLA) bulls? Are tweets playing a big part of Tesla’s valuation?
These are the questions bear Barclays analyst Brian Johnson finds himself asking, noting, “We are still refining our ‘ROT (return on tweet)’ analysis as the ultimate valuation tool.” While the analyst is convinced CEO Elon Musk’s electric car giant is an overrated stock, and one that exists in a “dream value” scenario land, he also does not see it without the realm of reason for shares to eventually hit $600- mainly riding a wave of bull conviction.
As such, the analyst reiterates an Underperform rating on shares of TSLA while boosting the price target from $165 to $210, which represents a close to 43% downside from where the stock is currently trading. (To watch Johnson’s track record, click here)
With new updated methodology, Johnson lays out a “baseline auto” scenario that forecasts the giant to reap 840,000 units of volume by 2022, adding all this “while applying a solid 25x PE multiple (providing credit for future growth) and discounting back. That’s solid growth! That said, the PV in this scenario is only $145/share – well below Tesla’s current price.”
Johnson concludes that while this stock is still one he dismisses as expensive on a level of underlying principle, the electric car giant has room to grow all the same: “Under our exercise, what drives upside is probability of ‘blue pill’/uber-bull scenarios, in which Tesla is selling 2mn+ vehicles per year, while also sporting a 45-60x PE multiple to reflect optimism around future opportunity’s – leading to a PV per share of ~$1,400-1,800. Or put differently, for every 1% of the market seeing the blue pill scenarios as more likely, it implies 4-5% upside to today’s stock price. And, as blue-pillers consider additional addressable markets, the ‘dream value’ increases. So while we clearly believe that Tesla stock is fundamentally overvalued, it’s not hard for us to imagine how with enough bulls getting excited about future oppty’s (Energy, Mobility, Hyperloop, Neuralink…cars on Mars??), Tesla could be a $600 stock.”
Most of Wall Street lies between the bulls and the bears, sidelined on Musk’s brainchild, considering TipRanks analytics demonstrate TSLA as a Hold. Out of 17 analysts polled by TipRanks in the last 3 months, 5 are bullish on Tesla stock, 7 remain sidelined, and 5 are bearish on the stock. With a loss potential of nearly 15%, the stock’s consensus target price stands at $311.46.
Apple’s iPhone X Not Necessarily Extraordinary- But Will Sell
Apple Inc. (NASDAQ:AAPL) at last showed off its shiniest new gadget, among other new Apple Watch and Apple TV models- its heavily anticipated iPhone X. Did the tech titan shock and awe at its big iPhone launch event in Cupertino on Tuesday?
BMO analyst Tim Long chimes in with impressions of a “Perfect X?” noting that while “there were few surprises” up the titan’s sleeve, “we did like the new phone’s design and the pricing adjustments.”
These pricing adjustments coupled with a $150 upsell to an upgraded storage configuration “should drive healthy iPhone ASP,” ventures Long, who also anticipates the new LTE network connectivity take on the Apple Watch will also be favorable for lifting ASP. Additionally, the Apple Watch could very well bring about a fresh replacement cycle for existing Apple Watch owners. The holiday season should see the 4K Apple TV taking off as well, which all bodes positively for the titan.
Though the new 10th anniversary edition of the original iPhone will not start shipping until early November, “While we were disappointed by the later-than-expected ship date for the iPhone X (pronounced “ten”), we still believe the refreshed iPhone portfolio will do well thanks to improved features and a growing installed base,” explains Long. For fiscal 2017, the analyst has cut his EPS expectations from $9.01 to $8.95, but has concurrently bumped up his forecast for fiscal 2018 from $10.90 up to $11.03, factoring in the November ship date.
Ultimately, the “iPhone 8 [is] less impressive, but will still sell,” contends Long, underscoring: “We were less impressed with iPhone 8. Although the moniker skips the ‘s’ generation, few new features differentiate the phone from its direct predecessor. However, for consumers upgrading from iPhone 6 and iPhone 6S, we believe the design will still represent an impressive leap in day-today use, and we believe the phone will be highly successful.”
As such, the analyst maintains an Outperform rating on AAPL stock with a price target of $180, which implies a just under 13% increase from current levels. (To watch Long’s track record, click here)
Most of the bulls are behind this stock, as TipRanks analytics showcase AAPL as a Buy. Based on 31 analysts polled by TipRanks in the last 3 months, 23 rate a Buy on Apple stock while 8 maintain a Hold. The 12-month average price target stands at $173.04, marking an 8% upside from where the stock is currently trading.