Tesla bear says ‘there is no question’ of dramatic stock losses to come
Roth Capital Partners Managing Director Craig Irwin and Wedbush Securities Managing Director Dan Ives join Yahoo Finance Live to discuss Tesla stock amid strong earnings report data.
Video Transcript
- Tesla up 8%, the EV maker notching a record profit in the quarter, beating analysts' expectations on the top and bottom lines. That is despite continued headwinds in its supply chain and the COVID shutdown at the company's gigafactory in Shanghai. CEO Elon Musk saying he's optimistic about a production rebound in China during the earnings call last night. Take a listen.
ELON MUSK: Yeah. We did lose a lot of important days of production, and there are upstream supplier challenges, where a lot of suppliers also lost many days of production. But Tesla, Shanghai, Giga Shanghai is coming back with a vengeance. I think-- notwithstanding new issues that arise, I think we will see record output per week from Giga Shanghai this quarter, albeit we are missing a couple of weeks.
- Well, to help us dig deeper into the numbers, we've got a Tesla bull and a Tesla bear. Craig Irwin is Roth Capital Partners managing director and senior research analyst. He's joining us alongside Wedbush Securities managing director and senior equity analyst Dan Ives.
Good to have both of you here today. Dan, let's start with you. We heard from Elon Musk saying yesterday that he's confident of a 50% growth in vehicle production. He thinks they can even hit 60%. How much of this do you think, Dan, is possible, when you consider where the Shanghai factory is right now and the fact that the gigafactories in Austin, as well as Berlin, haven't fully ramped up yet?
DAN IVES: Well, I think that was the main takeaway from the call. I mean, just giving back against the wall everything that they're seeing in China, in terms of the three week shutdown, that's probably about 50,000 units at least that come out of [INAUDIBLE]. The fact that Musk talked about even 60%-- I mean, that's really what investors are focused on today. I think it just shows that they continue to be able to navigate better than any other automaker, as well as asps continue to increase in the software model. That's what's shining here in what's been a dark market, especially for automakers.
- Craig, in looking at where the price is trading right now, in terms of shares of Tesla, you've got a price target of $250. 12 month price target there. What did you hear on the call yesterday that lead you to think maybe the company may not be able to hit its target?
CRAIG IRWIN: So I've never said the company is not going to meet its targets. I think Tesla is a category king. They are showing everybody how to execute and that Tesla is a great company.
The reason that I'm bearish is I believe, if you look at the big picture, and you say 900,000 cars produced last year versus Toyota, which produced nine million-- there's nothing that Tesla has that Toyota couldn't bring to market rapidly. Tesla's got a trillion dollar valuation. Toyota has a $300 billion valuation. Tesla is valued more than the rest of the automotive industry combined.
Netflix got absolutely taken apart yesterday because of share losses, and there is no question that at some point over the next small number of years, you will see Tesla start seeing some dramatic share losses. There's going to be more than 500 EVs on the road in North America and Europe by the end of '25, and Tesla will face real competition. Margin pressure-- the portfolio diversification is going to go into lower margin products. I think people are much better off in other companies if they want to invest in equities in the EV sector, although I have to say, Tesla is a fantastic company, just egregiously overvalued.
- So Dan, you heard Craig there say that there are better plays in the EV space than Tesla. You've got a 12 month price target of $1,400. What's your counter?
DAN IVES: I think Craig brings up human talk about the easy mark, and you're going to have competition across the board not just in Europe, but also in the US and China. Look, our view-- and obviously, we differ here Craig, and I think a lot of the more of the pundits [INAUDIBLE] that we don't view Tesla as an automotive company. We view it as a disruptive technology company. I think that's really the misnomer, in terms of our view of Tesla.
But it just comes down to they hated it at $50 billion. They hated it $100 billion valuation. They'll despise it $1 trillion, and I think it just continues to be that emotional bull bear story, but in my opinion, this is a stock is going to further grow into the valuation. There's going to be other winners too, not just Tesla with their short thesis on EV.
- Craig, I'm looking at Dan's notes here. One and a half million units of deliveries for the year is hittable, is what Dan says. Do you agree with that?
CRAIG IRWIN: I'm sorry. I missed-- what I missed what you said.
- One and a half million units of deliveries for the year. Do you think that's achievable?
CRAIG IRWIN: I actually think there's probably upside to that. I've been a big believer that the mini car is coming. The mini car I'm surprised is so late, given what I understand Elon said to a bunch of other people in the last couple of years. I'm really surprised that India is so late too.
So I think there's actually room for upside there, even without those things. If you look at what's going on in Europe right now, a lot of consumers are really thinking about energy security themselves, even though governments and regulators have been slow to actually take action with the unfortunate dramatic situation in Europe. I think you're going to see sales acceleration in Europe. I'm surprised they didn't talk about foot traffic on the call last night.
So yeah, there's upside to those numbers. Doesn't change the fact they're egregiously overvalued, and there's any one of a hundred different companies that can bring the exact same thing to market. Technology company-- so what? There's technology in every frickin' car on the road these days. You look at the history of that technology, it goes down in price, down in margin, continuously.
So Tesla faces a very stiff competitive environment that's developing right now. They are the category king, a fantastic company. They set the pace, but they're not going to operate in a vacuum forever. Disruptive technology comes from a variety of different places, and I think there's some fatal flaws in their approach around some of the different key technologies that they're trying to bring to market.
- Dan, let's talk about the robotaxi. This is, of course, the autonomous vehicle that Elon Musk has talked about-- no steering wheel, no pedals. We heard from him yesterday saying he thinks that Tesla could reach volume production by 2024 and that it's going to be a massive growth driver. How significant do you think it's going to be?
DAN IVES: Look, we don't factor that into our valuation. I just view it as that's more of a prove me. Obviously, when it comes to FSD, that's a big part of the Tesla story, when we look out from 2025 onward. And obviously, Musk has gotten slack here, in terms of just over promising and under delivering.
And I think Craig would agree-- I think FSD overall is going to be a huge driver for the automotive industry. I think, incrementally, in my opinion, to the valuation of Tesla. But to be clear, I view that as cherry on top of the sundae. We don't need that to see a 1,400 base date.
- Craig Irwin and Dan Ives. Good to have you both on. Appreciate the time.
