But billionaire value investor Mario Gabelli warned in a recent interview of a “problem” with the stock, predicting that the company will struggle to sell the massive amount of electric cars needed to justify its valuation in arrow.
Gabelli, chairman and CEO of investment firm AMCO, called Musk “phenomenal” and described electric vehicles as “the holy grail” in the current transition to a green economy. But he warned that trends in car sales will not allow Tesla to live up to its market cap, now north of $ 440 billion.
“You have about five years to reach that assessment,” says Gabelli, who spoke to Yahoo Finance on August 25, before the 5-1 stock split on Monday.
Gabelli draws on the expertise of the sector, having started his career in the 1970s as an analyst specializing in automotive and agricultural equipment.
He said he expects annual global car production to increase in the coming years, but pointed to the limited share of those vehicles that are likely to be electric.
“Today in the world, we are going to produce 80, 90 million,” he said. “By 2025, let’s go to 100 million. Are we going to have 10%, or 10 million, of these electrical devices? “
The number of cars sold in major global markets fell more than 4% last year to 90.3 million, according to LMC Automotive market analysis firm; Meanwhile, IHS Markit predicts auto sales to drop 22% year after year in 2020 due to the coronavirus.
Electric cars accounted for 2.6% of global sales last year, the International Energy Agency found.
The share of overall car sales made up of electric cars is expected to increase over the next decade, but infrastructure changes such as additional charging stations and costs posed by batteries could slow the increase, a note from JPMorgan Chase warned in 2018.
A Fortune analysis found that for Tesla to justify its increased valuation, it would need to generate $ 204 billion in annual revenue by 2030, which would translate to 3.5 million electric vehicles sold at $ 58,000 each. Last year, the company reported sales of $ 24.6 billion and did not make a profit.
But Tesla bulls claim that the action has institutional donors beyond dynamic retail traders, and the company’s Tuesday announcement of $ 5 billion in shares raised from the 10 largest banks suggests that the company has the backing of major lenders.
Although bearish on Tesla, Gabelli recognized the importance of electric vehicles as part of the transition to a green economy.
“Today, electric vehicles are the holy grail of the environment we are all a part of,” he says. “Just think back 100 years ago, when Henry Ford created the assembly line, the Model T.”
Gabelli spoke with Yahoo Finance editor-in-chief Andy Serwer in an episode of “Influencers with Andy Serwer“, a series of weekly interviews with executives from business, politics and entertainment.
Even though he would rather not invest in Tesla, Gabelli praised Musk.
“Elon Musk, when you think of SpaceX, when you think of what it does, in quotes the ‘boring’ ability to cut tunnels,” Gabelli explains. “Think about the ingenuity he brought to this business. “
“It’s phenomenal,” he adds.