Phillippe Houchois, an auto analyst at Jefferies, shared his thoughts about Tesla in a recent interview with Business Insider. The article noted that although Elon Musk has been selling Tesla’s stock (tax season is around the corner, after all), Houchois sees Tesla’s share price rising another 30% over the next year. And he recommends that investors buy it. Houchois’ price target for Tesla’s stock is $1,400.
Buy & hold companies that make goods & produce services you love
— Elon Musk (@elonmusk) January 29, 2021
Houchois thinks that Tesla will continue to rapidly scale up its production while maintaining strong profit margins as it produces cheaper vehicles to compete with legacy car companies. He told Insider that in the future, Tesla could even become the “everything energy company” in the same way as Amazon is the “everything store.”
The article also discussed Tesla’s “army of skeptics” who believe that Tesla’s market valuation is only based on highly speculative predictions about future sales. Many of Tesla’s skeptics, especially the extreme ones, have campaigned relentlessly against Tesla whether by intentionally spreading misinformation or simply crazed theories. Some are like ghosts, haunting every Tesla vehicle that has been revealed and claiming it will never be produced or will never be popular. We’ve seen this with the Tesla Model S, X, 3, Y, and now are seeing it with the Cybertruck and the Semi.
So, I would take what those extreme skeptics say with a grain of salt. Listen to the constructive criticism and feedback, but not the extreme conspiracy theories and manufactured FUD.
Despite the fears of skeptics, Houchois told Insider, “The way Tesla is structured — or their strategy — is they basically challenge, at multiple levels, the way the industry operates: the way cars are designed, the way cars are sold, the software.”
He’s been impressed with Tesla’s recent results. It delivered its 9th straight profitable quarter in the third quarter, with an operating margin (a key measure of profitability) of 14.6%, up 10 percentage points from two years earlier. He also noted that several factors are helping Tesla to preserve its strong margins. One key factor is something many dealerships don’t like — Tesla’s direct-sales model.
Houchois added that its aim of ramping up production to 20 million cars by 2030 from an estimated 890,000 in 2021 is “outrageous” and won’t happen. However, he does think that Tesla could produce over 8 million cars by that point. So his view is a bit conservative on this matter, but still puts Tesla at or near the world leader position in automobile production by 2030.
Houchois also said that Tesla’s goal of producing a cheaper car would help it seize market share from older companies. I think we are all ready for that Not-A-Model-2. What really gives Tesla an edge in a world that is quickly moving away from fossil fuels, Houchois pointed out, is that Tesla is a clean-energy company as well as an automaker.
“It’s almost like the way that Amazon, from a book-seller, became the ‘everything store.’ Then the long-term bullish story is Tesla becomes ‘everything energy.'”
I’ve seen many comparisons between Tesla and Apple. Tesla is often called the Apple of automakers. But comparing it with Amazon in the sense that Tesla is working towards providing all of a person’s energy and transportation needs, this also makes some sense.
What wasn’t a focus in this article was Tesla’s work in the field of artificial intelligence, its development of self-driving cars. Although it was briefly mentioned toward the end of the article, Houchois didn’t speak about this topic.
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