The latest Wall Street analyst to launch coverage of Tesla says investors should compare it to an unlikely tech giant

Photo by J. Emilio Flores/Corbis via Getty Images
  • Nomura Instinet has resumed coverage of Tesla with a $US300 price target and neutral stock rating.
  • Analyst Christopher Eberle says the company’s opportunity is akin to Salesforce’s disruption in the early 2000’s.
  • Demand, a top of mind worry for many other analysts, isn’t something Eberle says is a problem.

Wall Street has always struggled with how to compare Tesla to other baskets of stocks.

Some analysts, like Morgan Stanley’s widely followed Adam Jonas, lump Elon Musk’s electric car company with other traditional automakers, while others like Gene Munster is well known for his comparison to Apple.

Nomura Instinet, which re-instated coverage of Tesla on Tuesday, has another idea: Salesforce.

“Similar to some of the Software greats’ disruption of enterprise hardware, TSLA is a true disruptor of the automotive industry, in our view,” analyst Chris Eberle said in a note to clients

“It forces legacy combustion engine behemoths to scramble to develop competing products without cannibalising their cash flow machines-keeping them comfortably at a distinct disadvantage, similar to what Salesforce (CRM) did when it pioneered the Software-as-a-Service (SaaS) business model.”

Eberle has reinstated coverage of Tesla after the firm’s previous analyst, Romit Shah, dropped the company in February, according to Bloomberg data. His initiation comes at a $US300 price target, about 7% higher than shares were set to open Wednesday.

According to Eberle, Tesla’s over-the-air software updates are akin to Salesforce’s move to put CRM (customer relationship management) software on the cloud in the early 2000’s.

“We liken this to TSLA’s over-the-air software vehicle updates, which alongside fewer moving and mechanical parts, essentially eliminates 80% of “maintenance” that historically required an auto mechanic (and, in CRM’s case, software engineer), ” Eberle said.

A massive opportunity

Like most Wall Street bulls, Eberle points to Tesla’s massive market opportunity in taking share from other automakers.

“For much of Tesla’s existence, established automakers did not even consider the company as competition,” Eberle said. “Even following the dramatic success of the Model S in the first half of the decade, Tesla was considered not much more than a novelty: a niche luxury automaker, primarily serving the upper end of the U.S. market. Over the past 24 months, however, that has all changed.”

Tesla market shareNoura

And he’s not worried – like many other analysts – about the latest slowdown in demand for Tesla vehicles.

“We continue to believe in the depth of worldwide demand, particularly considering the size of the regional markets in Europe (double the U.S. market) and China (becoming many multiples of U.S.),” Eberle said.

“Furthermore, we see the introduction of Model 3 leasing as a potentially big demand lever, and we believe that a mass-market SUV/CUV offering in the Model Y (unveiled March 14 2019, with mass production expected by end-2020), could double Tesla’s total market opportunity.”

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