Tesla (NASDAQ: TSLA) reported a profitable sixth straight quarter, which means the company has reached its first full profitable year. While Tesla's CEO Elon Musk expects the company to reach a long-term volume CAGR of 50%, Ferragu believes Tesla will grow closer to 100%.
New Street Research Managing Partner Pierre Ferragu has joined Fox Business to explain why he's not worried about Tesla's stock slide. The analyst said he understands that Tesla is a volatile stock. However, any stock can be in the same state as Tesla. Ferragu isn't particularly worried about this.
Tesla now has a very large market cap, while the company has very little short interest. There is usually a liquidity problem in small startups that are followed by millions of retail investors. Therefore, he believes Tesla is relatively well protected from this. He stressed that retail investors are very fond of Tesla, and today's price is a result of retail investors holding, and buying more and more shares of the company.
"Our retail investors love Tesla a lot and where the price is today is the result of retail investors like holding and buying more and more tesla. Now the valuation is about all right."
Ferragu pointed out that Tesla currently has a production capacity of one million vehicles. While Musk said during the Q4 2020 Earnings Call that its growth will exceed 50% in 2021, the analyst thinks that this year they will grow closer to 100% in car production. Given the expansion of production facilities in Giga Shanghai, as well as the start of production in Giga Berlin and Giga Texas, such an assessment seems very realistic.
Ferragu also explained why Tesla's market capitalization now exceeds the value of the world's nine most expensive manufacturers combined. He pointed out that all carmakers will still have to switch to electric vehicles, but this will destroy their profitability for several years. The transition process will be very expensive for them. At the same time, Tesla began development with electric vehicles. The company has been working in this field for over 10 years and has accumulated a lot of valuable experience.
The second factor is that, over the next 10 years, Tesla will continue to increase its market share. They will grow by at least 50% per year, every year. Therefore, the company has a huge advantage--being an experienced leader in the field of electric vehicles--while others will lose market share. Precisely because carmakers are losing market share, their value suddenly drops compared to a company whose value is growing.
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About the Author
Eva Fox joined Tesmanian in 2019 to cover breaking news as an automotive journalist. The main topics that she covers are clean energy and electric vehicles. As a journalist, Eva is specialized in Tesla and topics related to the work and development of the company.