Gene Munster and his company Loup Ventures have recently released their tech predictions for 2020. He has a great track record in the tech sector, specifically with Apple. Lets see what he has to say about Tesla for this year.
Munster is an analyst turned venture capitalist. He used to be a senior research analyst at Piper Jaffray (an investment banking company) and now he’s the co-founder and managing partner of Loup Ventures which is his VC firm that invests in tech companies.
He also has many years of experience researching larger tech companies like Apple, making him have a great insight into what big companies are up to. His views of Apple in the past were very forward-looking and they’ve been correct. So despite there being some bumps along the way, he’s always stuck with Apple.
So, what does he has to say about Tesla? A company that he’s been following and researching. Let’s start with Gene Munster’s predictions from last year for Tesla in 2019. Loup Ventures predicted that despite increased competition, Tesla will still maintain its 50% plus market share in the United States which ended up being the case.
Remember that many other analysts were bearish throughout 2019. Tesla stock dropped below $180 a share and people thought the company wouldn’t make it, and that there would be huge competition. Now we have 20/20 hindsight but at the beginning of the year it wasn’t a sure thing that Tesla would succeed in 2019, especially after the slow first quarter.
Munster’s 2019 prediction has been correct throughout. Until September 2019 Tesla sold 75 percent of all battery electric vehicles in the United States according to InsideEVs, so Loup Ventures statement in 2018 turned out to be correct. Tesla has actually far exceeded 50 percent market share, they have had 75 percent and we have yet to see any real competition for Tesla in the EV space.
Loup Ventures has also made a prediction for 2020 for Tesla. They expect Tesla to exit the year with above 60% percent US EV market share. They also say that GM has 17 percent market share with its lead in the US auto market today. For comparison, of course 17 percent of the overall 97 percent ICE car market is much more than the 60 percent of the 3 percent EV market that they’re predicting for Tesla to have by the end of the year. But as EV market grow, analysts do expect to see Tesla’s market share come down from this 75 percent level.
It’s pretty amazing where Tesla is today, given their size and the impact that they’ve had. Despite only having about 0.5 percent market share of the total global auto market. Furthermore, Loup Venture’s main prediction for 2020 is that Tesla will exceed deliveries estimate of 463,000 vehicles of wall street.
Gene Munster points out that China Giga factory is just starting to deliver vehicles, and that alone will drastically increase Tesla sales. Also, the Model Y is expected to roll out in next year for which Elon Musk has said that the demand for that vehicle could eclipse the Model S, 3 and X combined. This is because the SUVs / crossovers are more popular than sedans.
Model Y could be lot more profitable as well, especially considering that the costs are going to be approximately the same as the Model 3, yet the price is going to be a couple thousand dollars higher. Gene Munster also notes that Tesla will grow 28 percent in 2020, whereas the overall auto industry will be flat. That means Tesla growth will be just eating away at the combustion engine vehicles from the legacy automakers. If that happens to be the case, then the car makers in 2020 better be bracing for a fall in sales.
The demand for Model 3 continues to be higher than their production, so more people are considering electric vehicles, and secondly every major car company is now starting to come up with electric vehicles such as Ford, Porsche and Audi, although, these vehicles have just awful battery range when compared to Tesla.
Loup Venture says that Tesla is a pure play investment for both battery and autonomous technology. Tesla is pushing hard to be the leader in both of these segments, but the car market alone is enough to add a huge amount of value to Tesla stock. Autonomous is a completely new market that hasn’t been done before and if they can crack the computer vision and become a leader in autonomous tech, it could open floodgates of investors pouring in money for Tesla stock.
Tesla is putting out impressive new features like Smart Summon and their sneak preview of the FSD, the full self-driving which shows stop sign detection for example. This actually hints that they could actually have fully autonomous tech sooner rather than later. Tesla now has a full year to hit their own 2020 deadline that they set for themselves for releasing full self-driving. Most other companies are using LiDAR, so they have no real data or miles driven collected, and have no machine learning expertise as well.
Google’s Waymo may be in the distant second place in autonomous driving, but they’re stuck using LiDAR as well. Of course Google is good at machine learning, but it’s almost like they’re shooting for something that’s more like automated driving instead of autonomous. Vehicles only driving themselves in predetermined areas on predetermined routes that have been fully 3d mapped, that’s automated like a subway system. If anything in the environment changes, the vehicles don’t know how to behave. Autonomous driving is much different which is more like what Tesla is working on, vehicles that can handle a much wider variety of situations because they’ve been trained to do so.
Gene Munster spoke to Bloomberg about his Tesla predictions. Bloomberg starts by saying that in 2020 Tesla is completely reliant on new China Factory to which Munster disagreeing and citing that China is important for Tesla because they will lower the costs of vehicles due to the tariffs and transportation by about 15 to 20 percent, but he says that Tesla is much more than this.
It’s a little naive for Bloomberg to think that Tesla is all about China. If you’ve been following Tesla, their master plan is really to bring electric vehicles to the world, not just to China. This is just one of the many steps that Tesla is taking to do that of course.
The Chinese factory will be immensely profitable for Tesla but they’ve already announced the Gigafactory in Germany and Elon has even said that the world is likely going to need about a hundred Gigafactories, so this story isn’t just about China.
Furthermore, Munster hasn’t set any specific price target for Tesla which is comparable to other analysts on Wall Street who have been completely wrong on their price targets. Most of them have been bearish and they do have to keep updating their price targets to follow Tesla stock that sort of defeats the purpose of a price target which is supposed to be a predictor of where the stock is going, not just following the stock.
Munster is more concerned about the direction of the stock, he says. He thinks, Tesla is worth much more than the 77 billion dollar market cap that it has today, and he cites that there’s an undeniable truth to electric vehicles and autonomous driving. His words very much resembles Peter Thiel’s question that he poses in interviews, and to startups, for great business ideas, which is; What do you believe as an important truth, that no one agrees with you on? This question reminds us of the idea that Elon Musk had, he believes EVs are better in every way than ice vehicles, very few people agreed with him on that. But now we’re seeing that he’s going to be right on that and Munster appears to be shedding light on it, that EVs and autonomous future are an undeniable truth, meaning they’re sort of inevitable, and they’re going to happen and Tesla has been one of the few companies working on this, when everyone else has been laughing at them.
Tesla has a huge head start for an incredible business, and it’s only in the early innings and Munster also says that although the stock price has run up and it’s a 440 dollar per share, he doesn’t believe that the stock has reached escape velocity yet.