Morgan Stanley on Tesla, Apple and Amazon at $600 billion

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.


  1. Gregg Thurman said:
    We asked Morgan Stanley’s

    Who are we?

    December 11, 2020
    • Tommo_UK said:
      @Gregg … “People familiar with the matter” 🙂

      December 11, 2020
  2. Tommo_UK said:
    “My take: Things are out of whack, as usual.”

    I have about 43,000 comments saved which I wrote and posted when I was helping moderate the old AAPL Finance Board up until about 2012 which agree with you.

    December 11, 2020
  3. John Butt said:
    I got into electric cars in 2017 with the purchase of a Hyundai Ioniq, a lovely car that just keeps on going. It has a nice feature called ASCC, Tesla call it Autopilot.
    I bought a Tesla a few months ago (from AAPL profits :-), relegating the Ioniq to other car. I would not buy TSLA at 1/10th the price, we now drive both equally. Here is a quick comparison of the key differences;
    ASCC is 3 years old, but significantly ahead of Autopilot, we use it, Autopilot is too dangerous
    The Ioniq has old battery tech, yet 20% more efficient than the Tesla
    Build quality is 10 years apart, the old car makers know how to build.
    Carplay just works I love being able to use only first names for favourites, proprietary software on the awkward Tesla screen fails too often.

    There are features of the Tesla that make it a great car, its sublime shape, Service levels, distance limit, driving style and cameras.

    The market will eventually realise that competitors can catch up and they will do it very quickly once they apply themselves. VW is well advanced and Hyundai have a lead as above and have announced a change to a skateboard battery, their one main weakness.

    A bigger risk for Tesla is APPLE, either through their own car or via CarPlay doing a lot more in many other cars. I expect Apple to nail it.

    December 11, 2020
  4. Robert Stack said:
    Bezos has no soul, Musk has no heart. Tim Cook has both. And its evident in their companies – just sayin…

    December 11, 2020
  5. John Konopka said:
    Tesla stock is an enduring puzzle. It would seem that there isn’t a prayer of the stock paying off. Dozens of new electric car makers are entering the field. A huge amount of battery research has been done to come up with a good battery for powering a car (Quantumscape ceramic batteries seem to be on the verge of succeeding). I don’t see the “moat” that will protect Tesla’s business. They may succeed for a long time at their current size, I don’t see them becoming dominant.

    December 11, 2020
  6. Bart Yee said:
    That quantum-scape solid Li battery, if truly proven and safe, may be the battery life breakthrough that changes smartphones, although Android would benefit much more because of its power draw issues.

    Battery life would cease to be an issue.

    For electric vehicle use, if the energy density and current draw/recharge rates are useful, weight will be reduced, space efficiency improved, and range increased. Would hope though that battery recycling is taken very seriously.

    December 12, 2020

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