Tesla stock: ‘A lot of the upside is already priced in,’ analyst says
Morningstar Analyst Seth Goldstein joins Yahoo Finance Live to discuss his 'sell' rating for Tesla as the stock jumps on Q4 deliveries.
Video Transcript
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JARED BLIKRE: Welcome back. Tesla up 9%. You can see there on your screen, having its best day in two months. And that's after reporting record deliveries for the fourth quarter, sales surging 87% for 2021, 936,000 vehicles sold.
And Morningstar analyst Seth Goldstein is here. He has a sell rating on the stock, along with a $680 price target. And we want to find out why. So Seth, thank you for joining us here today. What's in your latest research note?
SETH GOLDSTEIN: Hi, Jared. Thanks for having me. So, obviously, Tesla had a great fourth quarter, big increase, beat all the estimates, beat what I was expecting for Tesla. And it's looking to set up a really strong 2022 as well, especially as they're able to ramp new capacity with the opening of the Austin gigafactory and the Berlin gigafactory.
However, longer term, I really don't see any change from this record fourth quarter delivery. I still think longer term, Tesla will only get to about 5.7, 5.8 million vehicles by 2030. And the market is forecasting a much higher number. I see a slower long-term growth rate than what's currently priced into the stock.
JULIE HYMAN: And yet, Seth, that valuation hasn't slowed Tesla down. I mean, it's been pretty remarkable here how the stock has just continued to climb and climb and climb. And thus far, it has delivered on most of its targets, in fact, in the face of some skepticism regarding things like consistent profitability. So given that track record, what do you think the risk is to your forecast that Tesla does come out and outperform here and produce more vehicles?
SETH GOLDSTEIN: Well, I'd point to my bull case, where I have a $1,200 fair value estimate. And in my bull case, I assume that Tesla becomes one of the largest automakers globally by 2030, producing about 11 and 1/2 million vehicles. And when I look at the current stock valuation, it's nearly at my bull case. So that's why I think a lot of the upside is already priced in. And the market's assuming Tesla produces a much higher number of vehicles than my base case and is assuming Tesla becomes one of the largest automakers in delivered volumes.
JARED BLIKRE: And I just think back a year, I was having conversations about Tesla at the time. And people were looking at some of the competitors, some of the traditional automakers like Ford, GM, Volkswagen, saying, well, they have their own offerings. They're ramping things up. And VW, by the way, taking share in Europe.
But that's not really the story that played out last year. We saw these offerings come up. Ford, GM had great years. But do we see finally the bigger competitors really finally pushing into the EV space and finally taking some market share away? Or does Tesla keep winning it?
SETH GOLDSTEIN: Well, I think everyone can grow equally. I think what we're really going to see is EVs taking share from internal combustion engines. But when we do look at the EV offerings, over the next several years, the traditional automakers will have more EV offerings than they've ever had before.
And I especially point to the light truck market. Ford will actually beat Tesla to market in launching their EV truck, the F-150 Lightning, before Tesla launches the Cybertruck. And then you add new competitors like Rivian. And in the light truck market, Tesla won't enjoy their first mover advantage that they've had so far with nearly all the vehicles.
JULIE HYMAN: So Seth, who do you think is going to really-- I mean, as you say, there's multiple different sources of potential competition for Tesla. Is there going to be, though, another Tesla, so to speak? In other words, obviously we've seen a lot of market interest in the likes of Rivian, for example, as another pure play. But do you think in terms of growth, there's going to be another single player that's going to do as well stock wise as Tesla has done?
SETH GOLDSTEIN: I think it's going to be very difficult for new entrants. As Elon Musk said, it's not that difficult to design an EV. It's a lot more difficult to mass produce an EV profitably. I think that's going to be the challenge that many new entrants, like Rivian and others, will continue to face. So I don't think there's likely to be another company just like Tesla. I think instead, the traditional automakers will shift their powertrain and start producing more and more EVs to the point where EVs make up the majority of their sales in a relatively quick time frame within this decade.
JARED BLIKRE: All right, we're going to have to leave it there, but appreciate you stopping by, especially on short notice. Seth Goldstein, Morningstar analyst.
