On Monday (April 20), Gordon Johnson, Co-Founder and CEO of research boutique GLJ Research, explained his $70 price target for Tesla (NASDAQ: TSLA) stock during an interview with Lou Dobbs on FOX Business.
GLJ Research, LLC is “a differentiated research boutique committed to identifying unique investment opportunities across a variety of sectors.”
As for Johnson, he has “more than 10 years of experience as an equity research analyst and was recently ranked by Bloomberg among the top stock pickers in the steel, iron ore, graphite electrode, electric vehicle, and solar spaces since initiating coverage in 2008.” He has “been recognized for his accurate stock picks in numerous publications including Bloomberg, Barron’s, Forbes, The Wall Street Journal, Reuters, FT.Times, andTheStreet.com.”
The interview was done on Monday at a time when Tesla stock was trading at $735.20.
Dobbs, who is the host of FOX Business show “Lou Dobbs Tonight”, started by introducing Gordon Johnson:
“Gordon is the guy who has consistently said that Tesla’s going down, and he’s now saying it’s going to go down to $70 a share.”
Dobbs then asked why Tesla stock was trading around $700 a share.
Johnson replied:
“So, I think the reason why Tesla is there is because you have a lot of optimism in the Chinese retail space. So, you have Chinese retail investors rolling into the stock which is supposed to stock back up to $700 after it did below 4$00 not that long ago.”
Dobbs then wanted to know what made Johnson believe that Tesla stock is headed towards $70. Johnson answered:
“If you look at Tesla’s current evaluation, they are valued at over a hundred billion dollars versus roughly sixty billion [dollars] for Volkswagen.
“Volkswagen sold 10.5 million cars last year versus Tesla’s 367,000 cars. So, Tesla needs to see tremendous growth.
“However, if you look at what happened Q3 2018 to Q1 2020, Tesla introduced eight new car variants to include the model 3 as well as the model Y, and over that time frame, their sales growth is up just 5.5%.
“So, their sales growth is declining significantly, and when you look at the fact they had two factories running in Q1 [2020] versus just one factory in the fourth quarter [of 2019], they produced less cars in Q1 of this year than they did in the fourth quarter of last year…
“The point is significant competition and a slowing in their growth, we think, is going to render the shares significantly lower.”
Dobbs next asked Johnson why would someone want to buy an electric car like Tesla at a time when it is possible to buy gasoline for below $2 a gallon and possibly less than $1 a gallon in the near future.
Johnson said:
“There’s no doubt that’s going to be a near-term headwind to the electric vehicle space… low oil prices are bad for the electric vehicle space…
“I think what investors are looking at when they look at EVs are the long-term transition to EVs, and we 100% believe that is indeed going to happen.
“We believe over the next five to 10 years there’s going to be a significant transition to EV.
“The problem for Tesla, however, is every major car company is going all in on EV; so whereas before essentially Tesla had a monopoly on the EV market, now you are going to have significant competition, and you can see that with significant share losses they’re seeing in Europe and even the United States thus far.”
Since TSLA set its all-time high — $917.42 — on February 19, it has gone down 25.14%,, as you can see from this six-month price chart by Google Finance:
Featured Image by “Free-Photos” via Pixabay.com. Tesla Stock Price Chart Courtesy of Google Finance.
