Tesla to $1 trillion?
One think tank is toying with the possibility after the electric car maker crossed the $100 billion market-cap milestone. Shares of Tesla are up nearly 37% in the first three weeks of 2020 and are sitting at a $103 billion valuation.
"The next milestone that I see happening is [Tesla becoming] the world's most valuable auto company," Yoon said.
Toyota Motors is currently the world's most valuable car company at a $233 billion market cap. But with Toyota's overall sales falling 2% in 2019 from the prior year, Yoon said there's room for Tesla to pick up the slack.
"One of the things that I see is, in the U.S., if you own a Toyota, you are three times more likely to want a Tesla," Yoon said, citing his firm's research. "So, I think that's actually very bad news for Toyota in the near term and in the long run. And you can see that kind of bearing out in their sales."
"What you're seeing is really every lineup that Tesla has is going after every major segment that Toyota has at a much higher purchase intent, and that's going to be bad news," Yoon said.
Moreover, roughly 9% of U.S. households — about 10 million, by Yoon's calculation — are very likely or extremely likely to purchase a Tesla as their next car, adding another leg to his bull case.
That catalyst could create "this amazing breeding ground" for Tesla to sell its various services, like its budding insurance segment, and software at a recurring clip to its installed base of customers, he said.
"You're already seeing this now with the advent of the full self-driving [vehicles], the half-a-second acceleration for $2,000," he said. "You'll also see the advent of what I would say is about the size of a Progressive, from an insurance standpoint. ... Progressive has about 13 million policies in force, $36 billion in revenue, $48 billion in market cap. That's the next stepping stone that you're going to see."
Together, those factors can drive "an immense amount of cash flow" to help Tesla attain yet another goal: selling its proprietary software and battery technology to legacy automotive players that are having trouble catching up, Yoon said.
"What's interesting is that Tesla is growing the pie, even in the midst of a flat to even, in some cases, declining auto segment," he said, adding that Tesla isn't "really an automotive company in that they don't play by the same rules as other category companies do."
With its tech, its expanding business model, its growing customer base and, now, its nascent China business, Tesla has the catalysts in place to reach $500 billion, if not $1 trillion, in market valuation within the next decade, Yoon said.
"The most exciting thing I see from there is [Tesla CEO Elon] Musk's announcement that they're going to design a car by Chinese engineers for the rest of the world, because that's actually the long-run play," he said. "This sub-, call it, $30,000 perhaps, automobile that will be suitable for the rest of the world will really get them an unstoppable lead that will help them cross that half-a-trillion, maybe even a trillion dollar[s] from a market cap perspective."
Tesla shares ended trading on Thursday up by about half of 1%, at $572.20, despite UBS analysts' reiteration of their sell rating on the stock. Toyota climbed 1% to $143.06.