Content by: Medium
Well, this is what the bulls are telling us. For as long as Tesla has been listed, the outlook has been fiercely divided — the story of the bulls versus the bears. Even as it surpasses VW to become the second biggest listed car maker after Toyota, it is still the most shorted stock in the US — 24% of outstanding stock has been shorted. One very bullish fund manager expects Tesla to get to $5000 by 2025, almost 10 times from current levels.
So, let’s look at a simple comparison of Tesla versus Apple:
Apple launched the first iPhone in 2006. Prior to this time, Apple was largely known as the maker of the successful iPod. Even though Apple computers were around for a long time, it was more of a niche product, and certainly a lot less sexy than it is today. When Apple launched the iPhone, there were a lot of bears given the limited appeal of previous smart phones from competing companies. At this point in 2006, Apple’s share price was about $10. Very few imagined that 14 years later, Apple’s share price would have grown 30 fold, and the market cap would exceed $ 1.4 trillion.
In 2013, the first Tesla Model S rolled off the production lines. Total sales for 2013 was about 20 000 units. It is now 7 years later and exactly at the halfway point of where Apple is today. From the point of first production, Tesla’s share price is up about 16 fold. If the very bullish fund manager is correct, and Tesla can grow 10 fold from the $500 level, it will be worth close to $ 1 trillion.
One can argue that Tesla and Apple faced very similar challenges: They both entered markets where previous products failed, they both started to face stiff competition from the competitors once they started making inroads, and they both were headed by two controversial and insightful CEOs. So, what is the big difference between Tesla and Apple so far — “at the middle point of Apple’s 14 year journey”: Apple has been profitable for every quarter since the first iPhone was launched (2006), and the profitability steadily increased. Its track record is excellent, and with each new “iDevice”, its profitability steadily increased. Tesla on the other hand has enjoyed a lot less of a steady journey. Less than one year ago, there were question marks about Tesla’s future, and Tesla was forced to raise $2 bn to bolster its balance sheet. Its market cap bottomed at about $32bn in mid-2019. It has never made a profit since listing and has accumulated about $5bn of losses so far. Six months post the mid 2019 low point, one surprise profitable quarter and the first successful deliveries in China, and the share price is almost up threefold. Tesla is now bigger than VW which sold 11 million cars in 2019 versus the 367 500 it sold. I would also argue that electric car adoption is very different from smart phone adoption. There is still a lot of debate about how much better electric cars are versus their fossil fuel competitors, given the environmental impact of electricity generation. The bulls are also expecting an approximate 10 fold rise of the Tesla share price from current levels. Are the bulls getting a bit carried away with their extrapolation? I would say so!