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Apple’s potential 2024 car launch will rock Tesla’s stock: analyst

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Craig Irwin, Roth Capital Partners Analyst, joins Yahoo Finance Live to discuss what to expect from Tesla’s investor day.

Video Transcript

JULIE HYMAN: Let's talk to Craig Irwin about all of this, maybe not the Shiba Inucoin part of it. Roth Capital Partners analyst joining us to talk about this. Craig, good to see you. Thanks for being here.

The Tesla shareholder meeting does tend to be sort of a rubber stamp affair, right? Because shareholders seem to be broadly supportive of the company. But are you expecting anything out of today? Could we get a change in domicile announcement, for example?

CRAIG IRWIN: Yeah, no. I think the move to Austin is a really important indicator of probable awesome related news. We most likely will see a change in domicile or first production off the Austin line, first deliveries. So there have been viewings in public. There have been sightings of preproduction vehicles as recently as five or six weeks ago. So I think there is good potential for some exciting news in the city of Austin.

BRIAN SOZZI: Craig, how big do you think the Cybertruck will be? And do you think they'll actually start making this thing in early next year?

CRAIG IRWIN: The Cybertruck's been pushed three times. I would not be surprised to see it pushed again. And I think personally that the design is too polarizing. Now, there are some people out there that love it.

Just like I am a skeptic on Tesla overall, I'm definitely skeptical on the Cybertruck. I think there's some better options coming from other big names out there, household names that you already mentioned and then companies that might be doing IPOs right now, and other companies with you know established businesses launching EVs in the market today.

So we'll see. I'm a skeptic. I don't expect Cybertruck to be all that big.

JULIE HYMAN: So let's talk about your skepticism over Tesla more generally, right? Because I don't think anyone's buying Tesla right now, just betting on the Cybertruck, right? They're betting on just the company's general growth, which we have seen. And the recent delivery numbers were impressive.

CRAIG IRWIN: No.

JULIE HYMAN: What's the source of your-- they weren't? They weren't impressive? OK, tell me.

CRAIG IRWIN: So they turned 41,000. How can you not call that a phenomenal number? Tesla is an amazing company. And they've done a spectacular job. I cannot say it more clearly.

But I am a bear. I'm not saying short the stock. I believe that would be the wrong thing to do because they have some very specific levers to pull. One is the launch into India, the other is the launch of a mini-car. These are not in the plan. These are not well-communicated out there.

I'm surprised we haven't seen formal recognition of this more broadly, even as much as a year ago. Look at Tesla and the valuation. It's more than basically the rest of the automotive industry combined. And you look at some of the surveys out there. I saw one recently, 70% of chief investment officers would rather invest in companies like General Motors and Ford to play electric vehicles than invest in Tesla.

So I just think there are better opportunities elsewhere, better our opportunities in small cap. Love Tesla, love what they've done. But hard to push it as something people should buy here.

BRIAN SOZZI: Craig, I just star almost spilled coffee on myself. I saw your price target across the screen, $150. How do you get from Tesla's stock trading about 786 now to 150? What has to happen?

CRAIG IRWIN: So the biggest catalyst over the next couple of years is going to be the launch of the Apple car. 2024, but it's going to be kind of like the Porsche launch for the Taycan, right? You'll see them announce something probably in the 10,000, 20,000 range. And then look to crush numbers the way Porsche does. The technology in that car I expect to also be amazing, bleeding edge technology, typical of Apple.

The market share erosion we're going to see from the abundant brands launching into this market is going to be a significant factor. And I think $150 level, something in that range is where Tesla would be fairly valued in comparison to the rest the automotive industry today.

Now, there's catalysts that have to land for us to get there. I'm not saying this is going to be tomorrow. But I really think it's the best way to indicate people are better off investing elsewhere.

JULIE HYMAN: So if we're thinking about an Apple car a few years down the road, I mean, should we think about 150 as more of a multi-year price target rather than in the next 12 months?

CRAIG IRWIN: Well, it kind of depends, right? Is Apple going to go out there and actually give us a little bit more visibility? I've been doing a little bit of work on that, trying to prod people because I think it would be responsible on Apple's part, particularly considering the ramifications in the market.

But there are things that could bring 150 to fruition, absolutely, at Tesla. The story that they have an edge on battery prices obviously falls apart if you look at their external sourcing of batteries and how much they buy outside versus make in the Gigafactory. These things, as these become evident, I think, are key catalysts for people reallocating money elsewhere.

And retail is really what drives valuation in the stock. When retail investors see other things really working, maybe working better than Tesla, I think we see the reallocation. And it could move out quite violently, just the way that retail moved in over the last 18 months.

BRIAN SOZZI: And Craig, if you are in fact one of those retail investors that have stayed long Tesla and been a supporter out there on social media, what have it, should you be scared by what General Motors has announced this week in terms of EVs?

CRAIG IRWIN: Well, you look at what Mary Barra is doing, right? She's being very strategic. A good illustration of what she's doing is available from the investment with EV Go and tripling their network. General Motors wants to be able to sell EVs everywhere in the United States, not just in California and New York and Massachusetts. They want to sell EVs in every state.

They're looking to have charging in underserved regions where they expect to probably sell EVs. They're laying the groundwork properly to be able to make this a material portion of their mix going forward. There's several other discrete items we can point to, others that they're pointing to over the course of their analysts' day.

But General Motors should not be underestimated. It is an American icon.

JULIE HYMAN: Craig, finally, I want to ask you about something else that is a potential risk with Tesla that is perhaps not talked often enough about, and that is the safety record of the car, both with some of the fires that we've seen and with the Autopilot, which is not really an autopilot. But that's a separate discussion maybe, or maybe that's part of this discussion.

How big a deal that? Is it going to be a problem? I mean, investors seem to have mostly shrugged off those kinds of concerns.

CRAIG IRWIN: So it really depends on who you talk to, right? If you talk to someone that owns a Tesla, they absolutely love the Autopilot, they love the full self-driving features. And I talk to you a broad range of different people.

If you talk to investors, they find the concept of optical illusion, which is really what's mostly behind these crashes, as extremely scary. That means that Tesla said, eh, you know what? Shrug our shoulders, a level of accidents is acceptable. That's not something you see as far as behavior out of the other automakers.

Then when you talk to ADAS experts, people that are on the bleeding edge of technology in the automated driving system market, the resolution available in the Tesla cameras, the hardware in the cars is inadequate to deliver the level four at any level of functionality that would have safety consistent with what we expect basically from the airline industry, the most automated transportation industry right now.

Yeah, I personally find it highly problematic. It's going to come down to politics at the NHTSA board hearings and whether or not they want to force something on Tesla. You don't want to destroy a company that's being so successful. But there really does, in my view, need to be a tighter focus on safety for consumers.

BRIAN SOZZI: Craig Irwin, Roth Capital Partners analyst, appreciate the insight. Have a great rest of the week.