When it comes to Tesla, analysts and investors often find themselves debating a wide range of topics, from quarterly earnings to the qualities of CEO Elon Musk. But ultimately, their opinions on Tesla’s stock come down to one thing – the numbers.
HSBC analyst Michael Tyndall recently issued a Sell recommendation on Tesla’s stock, setting a price target of $146. This bearish view had an immediate impact, causing Tesla’s stock to drop 5.2%. In comparison, the S&P 500 and Nasdaq Composite fell 0.8% and 0.9%, respectively.
Tyndall’s coverage initiation report, which spans an impressive 110 pages, is a comprehensive analysis that rivals most Wall Street reports. Amidst all the information presented, there is one number that stands out: 13%.
Tyndall projects an average annual growth rate of 13% for Tesla’s car business between the years 2023 and 2030. According to his analysis, in 2023, Tesla is estimated to sell approximately 1.8 million cars at an average price of $45,000 each. By 2030, Tyndall predicts sales numbers to reach 5.8 million cars, with an average price of $32,000.
On the other hand, Canaccord analyst George Gianarikas is a firm believer in Tesla’s potential. He rates the stock as a Buy and has set a price target of $267. Gianarikas projects a more optimistic average annual sales growth rate of around 20%. According to his calculations, by 2030, Tesla could potentially sell about 6.6 million cars, with an average price of $45,000 per vehicle.
The 7 percentage point difference in growth projections between these two analysts is significant. It translates to the difference between a $190 billion car business and a $300 billion car business by 2030.
In the end, the debate between Tesla bulls and bears revolves around these crucial figures. While some analysts like Tyndall adopt a more cautious stance, projecting moderate growth rates, others like Gianarikas see tremendous potential for Tesla’s future. One thing is for sure – the numbers will continue to shape the opinions and discussions surrounding Tesla’s stock.
Future Fund Active ETF (FFND) Co-founder Projects Massive Growth
Future Fund Active ETF (FFND) co-founder Gary Black has bold predictions for the next decade. He envisions selling a staggering 10.2 million units by 2030, with an average price of around $47,000. This projection equates to an impressive average annual growth rate of approximately 29% over the next seven years. If this growth trajectory remains consistent, the car business could reach a substantial $480 billion by the end of the decade.
Valuing growth stocks can be immensely challenging due to the significant differences that even slight variances in growth rates can create. For instance, the disparity between 15% and 25% average annual growth over a few years is difficult to comprehend. However, the impact becomes more apparent when expanded over seven years, showcasing how a higher growth rate can essentially double the size of a company.
On the other hand, the same calculation applied to a company growing at a modest 3% or 5% per year, which mirrors the percentage difference between 15% and 25%, only results in approximately a 15% increase in size.
Understanding the nuances of growth stocks proves to be a daunting task.
To alleviate complexity, it’s helpful for investors to occasionally take a step back and focus on something more straightforward. For example, if an investor believes Tesla will only sell 5 million cars in 2030, they may not have much confidence in the stock’s potential. However, if the number increases to seven million, they become more comfortable with its current trading value. And if the projection reaches an ambitious 10 million cars sold, these investors would absolutely love Tesla shares.