I am not much for Peter Lynch type anecdotal evidence as a basis for either fundamental analysis or technical analysis in the stock selection but one of my sons, who is 28 years old, recently gave me a lecture on the future of Tesla (TSLA) that actually made sense.
He believes TSLA will one day be the biggest market-cap stock in the market because it is the Apple (AAPL) of the car market. His reasoning, at the risk of oversimplification, is that Apple’s iPhone took the world by storm for one reason beyond its intrinsic quality and usefulness – it dominates because it happened to be introduced to the market at the exact moment that his millennial generation was able to afford to buy the iPhone. Now the TSLA is introducing its Model 3 at a price and a moment when the same millennial generation is reaching the point in their lives when they can want and afford one.
Simply put, he tells me, everyone he knows is on the Tesla waiting list for the Model 3.
According to reports, reservations for the car are now averaging 1800 per day and have far surpassed the 500,000 mark – http://money.cnn.com/2017/08/02/technology/business/tesla-earnings/index.html.
And if the reviews are any indications, that number is only going to increase as Tesla gets closer to delivering the vehicle – https://www.cnet.com/roadshow/auto/2018-tesla-model-3-review/.
And, more simply put from a long-term investment point of view, he points to AAPL”s current market cap north of $800 million and TSLA’s current market cap at $57 million and says “do the math.” TSLA has room to move up 14 times its price today. Can this be true? Well, when AAPL introduced iPhone in 2007 its stock was selling at a split-adjusted $11 per share. It is now sells at close to $162 a share – 14 times its price at the iPhone’s introduction ten years ago (how about that?!).
So, as they say on Wall Street, what’s a price target on the upside for TSLA – $800 or so a share…
(click on the charts for a larger view)