Tesla Motors Inc. CEO Makes A Bold Statement Which Includes Apple Inc.

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Tesla Motors Inc. CEO Makes A Bold Statement Which Includes Apple Inc.
ElisaRiva / Pixabay

After last night’s earnings report, Tesla earned several price target cuts

Tesla Motors disappointed Wall Street big time with its earnings report last night, missing its delivery target and sending shares tumbling. The EV manufacturer’s stock fell as much as 5.59% to $200.90 per share during regular trading hours today.

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Musk: Tesla will be as big as Apple

We’ve had so many comparisons between Apple and Tesla at this point that it’s beginning to sound like a broken record. But Tesla CEO Elon Musk brought up Apple in last night’s earnings call, making a promise that bulls totally believe and bears just roll their eyes at. He was basically trying to justify the massive amount of money they’re planning to spend on capital expenditures.

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According to a transcript of the earnings call, Musk said, “If you take this year’s revenue, around $6 billion or thereabouts, and if we are to maintain a [30%] growth rate for 10 years, add to your 10% profitability number, and have a 20 [P/E], our market cap would basically be the same as Apple’s is today.”

Can Musk succeed?

The Tesla CEO spent a good chunk of time trying to justify the high capital expenditures. Morgan Stanley analysts said afterwards that they pressed the “insane button” on capex. Of course “insane button” is a reference to a new feature Tesla recently added to the Model S.

Musk is constantly making big promises and bold statements about Tesla, and Wall Street is probably beginning to question whether he can keep pulling off what he says he will do. Tesla currently has a market capitalization of about $26.9 billion—just a miniscule fraction of Apple’s hefty $724.8 billion market cap.

Tesla’s got a long road ahead if it’s going to ever become the size of Apple. For the fourth quarter, the EV manufacturer posted non-GAAP losses of 13 cents per share, significantly missing the consensus estimate of 31 cents per share in earnings. The automaker also missed on revenues, which came out at $1.095 billion.

Tesla price targets cut

After last night’s earnings report, analysts from at least two firms cut their price targets for Tesla Motors. Pacific Crest analysts reduced their target from $316 to $300 per share.

JPMorgan analysts went even further, downgrading Tesla from Neutral to Underweight. They also trimmed their price target from $180 to $175 per share. Barclays had already reduced its price target for Tesla ahead of last night’s earnings report, bumping it down from $220 to $200 per share.

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Michelle Jones is editor-in-chief for ValueWalk.com and has been with the site since 2012. Previously, she was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Email her at Mjones@valuewalk.com.
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4 COMMENTS

  1. Tesla will be able to take 10% net profitability at volume, pretty easily. They’re currently taking *26%* gross margin, which is kind of absurdly high, really. Everyone who says Tesla’s cars are overpriced, yes they are; they’re overpriced in order to generate funding for capex.

  2. Based on Musks own numbers….

    $6B revenue today and 30% compound growth for 10 years Gives a revenue of $82B

    With 10% profitability and a P/E of 20 that gives a capitalisation of $164B

    If Elon Musk thinks that $164B is the same as $720 then it time to GTFO. Run for the hills.

    In any case automotive suffers from massive overcapacity. It isn’t a market where any volume manufacturer takes 10% net and the P/E ceiling is about 12, not 20.

  3. once Battery technology is advanced enough as to charge its ev battery as fast as filling a vehicle up with gas, the market will explode. The promise of graphene related batteries I believe this technology is just around the corner. I believe Apple is currently researching the use of graphene capacitor type batteries.

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