Why Tesla's newest stock-market bull says the company is simply without peers

By Emily Bary

A Stifel analyst says legacy carmakers don't have the EV know-how to adequately compete with Tesla

Despite a challenging backdrop for electric-vehicle makers, Tesla Inc.'s stock can still thrive, according to the newest bull on Wall Street.

Stifel analyst Stephen Gengaro initiated coverage of Tesla shares (TSLA) with a buy rating and $265 price target late Tuesday, writing that the company is peerless in the EV market and more akin to technology giants.

Tesla shares stormed almost 5% higher on Wednesday to be among the largest daily gainers in the S&P 500 SPX.

Gengaro acknowledged the recent slowdown in EV sales, but he sees better days ahead for Tesla, which had witnessed a 25% stock decline on the year at the time he published his note. The company should come to see improving trends as charger availability grows, less expensive models debut and Tesla's overall technology improves, Gengaro wrote.

See also: Rivian's stock surges on $1 billion Volkswagen investment and joint-venture plan

Admittedly, it's not a short-term game. While Tesla's management predicts that the company can start production on the low-cost Model 2 by the start of next year, he and his team "are being a bit conservative on timing in our model."

Gengaro thinks that forward earnings expectations are bottoming for Tesla, after the 2024 consensus forecast for earnings before interest, taxes, depreciation and amortization falling by 41% over the past 12 month and the 2025 forecast on the metric dropping by 46%. With those negative estimate revisions likely out of the way, the dynamic could be a "positive for the shares," he said.

Read: Tesla quarterly sales are tracking lower, this analyst says

In Gengaro's view, Tesla has no peers in the electric-vehicle business: "There simply are no direct comps." That's because he said legacy carmakers don't have the requisite technology know-how in EVs, and they're way behind in the electrification game. Plus, they don't have Elon Musk as their CEO the way Tesla does, he added.

Gengaro would rather look at Tesla as a technology company akin to Apple Inc. (AAPL), Amazon.com Inc. (AMZN), Alphabet Inc. (GOOG) (GOOGL) and Microsoft Corp. (MSFT) Like those powerhouses, Tesla shines with its tech, boasts a compelling growth outlook over the long run and stands to benefit from the rise of artificial intelligence.

Related to AI, Gengaro is upbeat about the potential of Tesla's Full Self-Driving business, which "likely creates significant value through FSD sales, possible licensing agreements, and as a key enabler for longer-term robotaxi initiatives."

He titled his report: "The Future is Closer than We Think."

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-Emily Bary

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06-26-24 1647ET

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