Is Tesla Motors Inc (NASDAQ:TSLA) a car company or a tech company? That’s what Wall Street is asking, and many analysts and investors are just scratching their heads about it. But Litchfield Hills Research Analyst Theodore R. O’Neill says it’s simple: they just don’t get it.
Tesla is a car AND tech company
The biggest concern investors and analysts have about Tesla is the fact that its stock isn’t behaving like the stock of an automaker. It behaves more like a technology stock, and CEO Elon Musk has even described the company as “an automotive technology company.” O’Neill points to further differences between Tesla Motors Inc (NASDAQ:TSLA) and the average automaker.
Founded in 2007 by Dov Gertzulin, DG Value is a value-focused investment firm. The firm runs two primary investment strategies, the diversified DG Value Funds and the concentrated DG Concentrated strategy. Q3 2021 hedge fund letters, conferences and more The flagship DG Value Fund was launched in 2007, specializing in middle-market distressed situations and event-driven Read More
“The mainstream auto industry is built around a system of manufacturers, dealers and marketing efforts that only makes sense if you can convince customers that they have to buy the latest model,” O’Neill wrote. “If Tesla had to play the game that way, it would probably not make it to 2015.”
Tesla is still undervalued
According to O’Neill, Wall Street’s biggest problem when it comes to Tesla is that investors and analysts are trying to compare it to “the status quo.” He said as long as the Street and media covering the auto industry keep missing what Tesla is really about, they won’t be able to understand what the company has created in the Model S sedan. As a result, he believes they will continue to downplay the EV automaker’s future success and its current market share gains.
He notes that Tesla’s market share gains in California “are going unchallenged by the mainstream automakers.” Instead, he believes mainstream automakers are “paying too much for IHS industry analysis.”
Tesla still rated a Buy
O’Neill continues to believe that shares of Tesla Motors Inc (NASDAQ:TSLA) are undervalued and has reiterated his Buy rating and $188 per share price target for the stock.
He doesn’t believe that slow growth in the U.S. gross domestic product will affect Tesla’s revenue estimates for this year, although he notes that as the global economy slows down, this could have some effect on the company’s rollout to the European Union and Asia.