Allianz Global Investor’s Walter Price says Tesla will be more profitable than people think and could grow by 30% to 50% annually for the next three years.
The portfolio manager told CNBC on Wednesday that Tesla was “more frugal” than most car companies and was raising a ton of cash.
He also said Tesla was “redefining the auto industry” as Apple redefined the cellphone industry.
Price added that Tesla’s stock price was ahead of itself from a valuation standpoint.
Walter Price, a senior portfolio manager at Allianz Global Investors, told CNBC on Wednesday that Tesla would be more profitable than people thought and grow by 30% to 50% a year for the next three years.
Price said Tesla, which in July posted a fourth consecutive quarterly profit for the first time, saved more money compared with other auto companies because of its direct-sales model.
He added that Tesla was “more frugal than most” and had raised a lot of cash in the past year.
“We talked to some of their suppliers, and they’ll go redesign a part to save $1 on a $5 part,” he said. “And they’ll spend a lot of engineering resources doing that.”
The fund manager also said Tesla was redefining the auto industry in the same way that Apple redefined the cellphone and technology industries.
“Having a car that takes the monotony out of driving on a trip out of your hands and turns it over to an AI system that does that for you, so you can spend that time doing something else — I mean that’s a transformation of the industry and a transformation of experience that I think everybody wants,” he said.
Read more: ‘I had run $5,000 up to $140,000 in just 2 years’: Here are the 7 trading rules stock-market wizard Marty Schwartz leverages to help ensure success
Price called Tesla’s Model Y “one of the best cars in the world right now” and said it could sell over a million units, compared with its sale of half a million units last year.
“It’s a great growth company — it’s not just an overvalued auto company,” Price added.
He said that Tesla’s stock price was ahead of itself from a valuation standpoint. The electric-vehicle company has returned over 891% in the past year and is now worth over $416 billion — that’s larger than the combined market capitalizations of Ford, General Motors, and Fiat Chrysler times three.
Price said that for Tesla to justify its stock valuation on an intermediate basis, it would need to grow by 30% to 50% annually not just for the next three years, as he predicts, but for the next five or 10. He said no car company had done that, except for maybe Ferrari in a “small niche market.”
These growth projections are optimistic, Price said, and many Tesla investors might not think about the reality of them, but “that’s what they have to believe to justify owning the stock for a long time.”
“I’m pretty confident about the next couple years though,” he added. “I think you’re going to continue to see good surprises out of the company.”
Tesla shares fell 15% in intraday trading Wednesday following news that Baillie Gifford, Tesla’s largest outside investor, said it was forced to trim its stake in the company.