He reiterated an underperform rating.
Then he raised his price target.
While Johnson's new $210 price target is still below the company's current $360.72, it is inching up from Barclays' previous $165 a share.
"We are still refining our "ROT (return on tweet)" analysis as the ultimate valuation tool," Johnson wrote in a note to clients on Wednesday.
The most realistic scenario, the report concludes, implies Tesla is highly overvalued. "Under our revised methodology, we see our 'baseline auto' scenario as the most likely end-scenario. It assumes in 5 yrs Tesla will have 840k units of volume while applying a solid 25x PE multiple (providing credit for future growth) and discounting back. That's solid growth! That said, the PV in this scenario is only $145/share - well below Tesla's current price."
So why are other analysts so much higher with their estimates and outlook for the firm?
Johnson calls the phenomenon the 'blue pill'/uber-bull scenario." In that projection, Tesla's sales eventually rise to 2 million vehicles per year, "while also sporting a 45 to 60 PE multiple to reflect optimism around future opportunities - leading to a price of about $1,400-1,800 per share."
The analyst concluded that several possible scenarios could play out for Tesla over the next several years, including these:
Forced sale - nominal value for Tesla
Our lowest scenario is now 'forced sale,' rather than the failure scenario used in our prior valuation. With failure, we assumed only a 0.5% probability, but that the value would be 0. Under our new 'forced sale' scenario, we assume a higher 3% probability, but a $50 value - or $25 per share in present value terms.
'Stalled auto' scenario - only value is in non-auto business
A 'stalled auto' scenario assumes that in five years Tesla will max out at 550k units (75k S/X, 200k Model 3, and 275k Model Y), but with high operating costs and low gross margins as it faces heavy competition from both legacy OEMs and other new entrants. Thus with only 2% op. margins (assuming gross margin of 16%), it implies auto net income of only $54mn. At a 12x PE multiple, and discounted back 5 years, it yields effectively no present value from the auto side.
'Blue pill auto' + new biz scenario - the real dreamers, and the key driver of the stock
Our last probability adopts the same financials as 'blue pill auto' mentioned above, but we kick the auto multiple up to 60x, to reflect upside opportunity from other businesses (whether it be Mobility, Tesla Semi, further upside from Energy, or...vehicles on Mars???). The present value per share in this scenario would be a rather lofty $1,819 - or 5x the current price of the stock. And while we assign it only a 2% probability, given each 1% probability is worth $18 of present value for the stock, 2% is enough for $36 of present value - or 17% of our revised price target.
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