Analysts Katy Huberty and Brian Nowak compare the valuations of three iconic tech stocks at the $0.6 trillion mark.
From a note to clients that landed on my desktop Frida:
Tesla reached the $600bn market cap milestone on December 7th (on a basic share count basis) as a significantly smaller company (by revenue and EBITDA) than either Apple and Amazon when they achieved the same market cap milestone, respectively.
When compared to Apple’s crossing of the $600bn mark in August of 2012, Tesla is less than 1/4th the size of Apple in forward year revenue and roughly 1/7th the EBITDA of Apple at that time. Compared to Amazon’s $600bn market cap crossing in early 2018, Tesla is less than 1/5th the size of AMZN in forward year revenue and roughly 1/3rd in terms of forward year EBITDA…
Tesla’s $600bn milestone reflects a significant valuation premium vis-à-vis when Apple and Amazon achieved the same cap.
At $600bn, Tesla trades at roughly 80x our forward year EBITDA estimate. Apple’s valuation when it crossed $600bn in August 2012 was ~8x forward year EV/EBITDA and Amazon was at ~22x forward year EV/EBITDA. Tesla’s EV/EBITDA multiple is nearly 10-fold that of Apple and roughly ~3.5-fold that of Amazon when they achieved the milestone.
We asked Morgan Stanley’s Apple analyst, Katy Huberty, to recall what the market narrative was at the time Apple reached $600bn. Here’s what she said:
While it took Apple nearly 30 years to reach a $300B market cap, it took just 18 months to grow from $300B to $600B in market cap in August of 2012. At the time, Apple was transitioning from a hyper- to a more sustainable-growth phase having just posted 5 consecutive years of 70%+ Y/Y iPhone shipment growth and 63% annual EPS growth. In the following two years, new CEO Tim Cook managed through a slower growth period while continuing to invest in innovation and initiate the first capital return plan. Services still represented 10% of revenue such that investors viewed Apple as a cyclical, product cycle driven hardware company represented by a <8x EV/EBITDA multiple compared to >20x today.
And here’s what Morgan Stanley Internet analyst Brian Nowak said in regards to the mood around Amazon back in early 2018:
Amazon’s 2H17 saw a significant fulfillment network square footage build as well as the scaling of its high margin revenue streams, as the market began to adjust to a 5 part sum of the parts valuation (1P, 3P, AWS, subscription and advertising). Over the course of 2018, sustainable growth in core retail revenue and record margins justified this elevated investment in fulfillment capacity and allowed the market to appreciate AMZN’s long-term addressable market and earnings power.”
My take: Things are out of whack, as usual.