Tesla (TSLA) will soon be as big as BMW with “twice better margins,” analyst says

The Tesla Model Y. (Credit: MotorTrend)

Tesla (NASDAQ: TSLA) has had its shares slide in value over the past couple of days, but Pierre Ferragu of New Street Research insists it is nothing to worry about. The analyst indicates the future outlook is positive, and Tesla is well on its way to being one of the largest car companies in the world in terms of output and sales.

Ferragu appeared on CNBC’s Squawk Alley on Friday, September 4, to talk about tech stocks and their slight decline during the trading week. Ferragu talked about Apple stock initially and then gave his thoughts about Tesla shortly thereafter.

“If you look at Tesla today, things are very tangible,” Ferragu said. “I believe that with a very high level of conviction. [Tesla] has very unique EV cars in terms of performance. They are building an iconic brand, and they are like an innovation machine on this electric vehicle technology.”

Ferragu also believes Tesla is head and shoulders above competitors in assisted driving and semi-autonomous tech.

“In addition to that, they have, by far, the best driver-assistance technology in the market. So these are the things I love,” Ferragu added.

Ferragu holds a $1,500 price target and a Neutral rating for TSLA stock, and he believes the sky is the limit for the company’s growth in the coming years.

The level of confidence that Ferragu has in Tesla because of its iconic brand building, innovative tech developments, and semi-autonomous developments, has him believing the company can be the size of BMW in just five years.

BMW Group sold 2.5 million vehicles across its BMW, Mini, and Rolls-Royce brands in 2019, a 1.2% increase from 2018. Tesla, on the other hand, delivered 367,500 cars last year. This was a drastic increase compared to 2018, where the company delivered 245,240 vehicles. With more production facilities on the way, growth is certainly expected in the coming years.

“If I play them out over the next five years, I think Tesla is going to be, in five years from now, the size of BMW, with twice better margins. I think, by then, it could be worth $2,500, maybe $3,000 [per share],” Ferragu said.

The company’s valuation goes past its automotive sector and into the energy storage side of the company. Many analysts do not acknowledge Tesla Energy, which is a big mistake in determining the valuation of the company.

“On top of that, you have the Energy Storage opportunities, the Solar opportunities, and the Insurance opportunity, that I think is potentially very tangible. And then you have the opportunity for Tesla to really achieve something with its Full Self-Driving. But all the things are going to play out in the stock and be materialized and visible within multiple years,” he said.

Today, Ferragu is advising his clients to buy TSLA stock on the automotive side of things, but that isn’t to say that the company shows extreme upside potential within other facets of its business plan within the coming years.

Disclaimer: Joey Klender is a TSLA shareholder.

Update: Added BMW and Tesla sales figures in 8th paragraph at 1:18 PST.

Joey Klender: Transportation Writer | Penn State Alum | Future World Series of Poker Bracelet Holder 🚀 🛰 ☀️ 🚘 🧠 🕳
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