Tesla Going into Space(X)? Morgan Stanley Predicts Yes
Will CEO Elon Musk always lead the brainchild Tesla Inc (NASDAQ:TSLA) and the empire he created? When discussing “key man risk,” what would it mean for Tesla to lose the brains behind the operation? Worthy of note, Musk likewise heads the private company SpaceX with vision for rockets and spacecraft and a self-sustaining city on Mars. Wall Street whispers question if as time passes it will make more sense for Musk’s two biggest companies to merge into a “closer relationship.”
Morgan Stanley analyst Adam Jonas believes that of all the companies in his coverage universe, the electric car giant’s “‘key man’ risk” is the highest, “possibly rivaled only by Sergio Marchionne at [Fiat Chrysler Automobiles],” as the analyst adds: “Investors widely expect Elon Musk to, over time, devote increasing amounts of his time and talents to SpaceX, raising the very real question of who could replace him at Tesla. A combination of efforts between the two firms could address this important issue.”
However, this could be a positive, even as the analyst remains sidelined on Tesla, noting, “There’s cross-fertilization of knowledge from the rocket and spacecraft history to auto back and forth is — I think has really been quite valuable.”
Musk’s rocket maker’s economics could champion in economics when up against Tesla, Jonas wagers, explaining that based on his preliminary modeling of SpaceX, a launch business could wind up in robust standing when approaching markets boasting massive profits, including the proprietary satellite broadband. Anticipating that advantageously using these networks could realize “extremely high profits” for the company, Jonas sees a bull case valuation of $121 billion for the business.
“SpaceX’s competitive moat may be vastly superior to Tesla on a more sustainable basis. While still in the preliminary stages, we believe that SpaceX may have greater runway to increase its share of the value of the global space economy, which we forecast to be worth $1.1tr as our base case and $1.75tr as our bull case by 2040. 5,” underscores the analyst.
While there is “no apparent natural buyer for Tesla” from Jonas’ perspective, the analyst surmises pinpointing “extremely limited scope for potential strategic or financial buyers given the capital intensity, economic factors, political factors and aforementioned key man risk.” As far as Jonas sees the bigger picture, the Committee on Foreign Investment in the United States (CFIUS) poses a “formidable barrier to significant foreign ownership.”
Therefore, the analyst maintains a Market Weight rating on TSLA stock with a price target of $379, which represents a nearly 26% increase from where the stock is currently trading. (To watch Jonas’ track record, click here)
TipRanks pooled data from the last 3 months showing an overwhelming majority vote of caution on Wall Street aligning with Jonas’ apprehensive stance when it comes to the electric car giant’s prospects. Out of 22 analysts offering ratings in the last 3 months, 6 are bullish on Tesla, 8 remain sidelined, while 8 are bearish on the stock. While split between the bulls and the bears, is this stock overvalued or undervalued when looking at analyst expectations? With a solid return potential of nearly 9%, the stock’s consensus target price stands at $330.56.
Here’s Why Tigress Bets Apple Has More Upside Ahead
As demand grows for the new Apple Inc. (NASDAQ:AAPL) iPhone 8 and iPhone X combined with Services segment results that continue to fire up, and an uptick in iPad and Mac demand acting as a springing board for robust Business Performance, Tigress analyst Ivan Feinseth continues to be a strong bull for the tech titan.
As such, and anticipating more acceleration to come next year, the analyst maintains a Strong Buy rating on AAPL stock without suggesting a price target. (To watch Feinseth’s track record, click here)
For Feinseith, it remains clear that Apple’s smartphone reigns “number one” as both a product and key growth driver. However, there was a meaningful “reaaceleration” in both iPad and Mac sales in the latest quarter, with Feinseth likewise anticipating more gains from new product creations ahead as the Apple machine continues to spin out “new and innovative technologies.” This is company the analyst commends for its eye on developing new artificial intelligence (AI) technologies coupled with capabilities in augmented reality (AR) as well as virtual reality (VR)- for both products that are already on the titan’s table as well as ones that will pave the future of the tech-verse. Keep in mind, this is a company with eyes on leading the autonomous and connected vehicle technology arena.
Feinseth contends: “AAPL reported a significant reacceleration in China and due to India iPhone and Mac sales along with a big increase in Services revenue. AAPL will continue to drive revenue growth through increasing market share penetration in China, India and other emerging markets. We also expect accelerating Business Performance in 2018 driven by growing iPhone sales along with AAPL’s focus on new innovative technologies including automotive integration, home automation, healthcare and other IoT applications all integrating greater levels of AI and AR/VR capabilities. AAPL will also benefit significantly with the passing of the tax reform bill and the lower repatriation tax rate. AAPL will continue to drive increasing Return on Capital, greater Economic Profit and accelerating shareholder value creation. AAPL will also continue to enhance shareholder returns with its increasing return of cash to shareholders. We believe further upside in the shares exists from current levels.”
Moving ahead, the analyst believes that with a “massive” cash position and cash flow, the titan has the momentum to keep those gains coming through its initiatives, all while bringing forth capital returns to bolster shareholder returns.
TipRanks shows a strong analyst consensus backing this popular Wall Street tech darling, with 26 of 32 analysts polled in the last 3 months rating a Buy on Apple stock and 6 maintaining a Hold. The 12-month average price target stands at $187.97, marking nearly 11% upside from where the stock is currently trading.