Elon Musk says Tesla will be bigger than Apple.Analysts Say Not So Fast

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October 20, 2022

Esha Day | Bloomberg

Elon Musk believes that one day Tesla will be worth more than Apple and Saudi Aramco combined. Wall Street says not so fast.

The electric car maker reported third-quarter results Wednesday with better earnings, but lower-than-expected sales and profit margins. It’s the first time the company has missed earnings estimates since the third quarter of 2021, according to data compiled by Bloomberg. Musk also said demand was “a little tougher than otherwise” due to the recession in China and Europe.

A cautious stance on results and demand prompted several analysts to cut their price targets for the company on Thursday. Bloomberg data shows the company’s average target of $298, nearly 48% higher than the stock’s price on Thursday morning. Tesla shares fell as much as 9% to $202 in New York on Thursday.

“We remain cautious on valuations, especially given the expected high level of sales growth, and a material downside to our December 2023 price target,” JPMorgan analyst Ryan Brinkman said in a note. We are still looking at swing risks,” he said.

Once part of a trillion-dollar valuation group, Tesla now has a market capitalization of $667 billion. Apple’s market cap is he $2.3 trillion, while Saudi Aramco’s market cap is about $2.1 trillion.

Investors are eyeing demand for big-ticket purchases such as discretionary goods and cars this earnings season as U.S. consumers are caught between high inflation and rapidly rising interest rates. . Analysts and investors are watching for signs of a crack in demand after Tesla reported lower-than-expected third-quarter shipments earlier this month.

Risk to demand is a particular concern for Tesla due to its affluent valuation, which is heavily dependent on the company’s future growth potential. Tesla shares trade at 48 times his futures earnings compared to 17 times the S&P 500 index.

“Tesla’s stock is based on a growth valuation framework where access to low-cost capital is a key input,” BofA analyst John Murphy said in a note to clients, noting specifically the market. He added that the stock may already be fairly priced. Volatility.

Still, global economic turmoil, ongoing supply chain and logistics issues, and high raw material prices could dampen valuations in the short term, but analysts remain bullish on Tesla’s longer-term outlook. is generally maintained.

Despite lowering its stock price target, Deutsche Bank analyst Emanuel Rosner said, “Tesla is not protected from a recession, but amid a global recession, Tesla’s growth and profit We believe we are much more resilient than others in our industry.” From $390 to $355.