Gene Munster Concedes 'Credible Bear Case' For Tesla But Remains A Believer

Apple Inc. AAPL bull Gene Munster puts his money where his mouth is.

The early iPod owner continues to tote the evolved iPhone, and soon enough, he intends to take a similar sort of stake in Tesla Inc TSLA, whose Model 3 is reminiscent of Apple’s revolutionary tech.

“The current configuration is a little bit rich on these [Model 3] all-wheel drives, but as soon as they come down [from $48,000 to $45,000], that’s probably when I’ll buy one,” Munster said Tuesday on Benzinga’s PreMarket Prep.

The Logic Of A Permabull

The Loup Ventures managing partner is bullish on Tesla because he regards it not as a traditional car company, but as an autonomy play. 

“They’re essentially a computer on wheels,” Munster said.

“It’s a whole different manufacturing process. It’s a whole different service type of process. It’s a whole different model. The traditional automotives make a lot of their money on parts whereas something like Tesla, because it doesn’t have as many parts to break, that’s not how they make their money. They make their money on software.”

Even ostensibly bearish events are shaped to Tesla’s favor, Munster said. He anticipates a capital raise in early 2019, but is unconcerned about the effect on share price from a price-to-earnings perspective.

“We don’t think this should be valued at least in the near term on a traditional valuation metric like a P/E,” Munster said.

“The reason is that the opportunity that they’re going after is so great that it’s going to have leverage down the road, and down the road might be 2020 or 2022. So we’re not as concerned about what a capital raise in the middle of 2019 could do to that.”

From Munster’s view, Tesla is a $60-billion market cap company pursuing a multitrillion-dollar opportunity.

“It plays into what are undeniable trends about the future, whether it’s electric cars or autonomy and just renewable energy,” Munster said. “That’s the kind of stuff that the bulls like ourselves get excited about and are able to look the other way on this egregious price-to-earnings.”

Merits Of The Bear Case

Munster is confident, but he isn’t infallible. Just look at his Facebook, Inc. FB call.

“I’ve missed more than 100 percent of the run here in part because I’m not a big fundamental believer in the need for social media,” Munster said.

As such, his faith in Tesla isn’t entirely unrelenting. Last quarter, in particular, gave Munster reason to pause and give serious consideration to the bear case.

“We had to do some soul searching,” Munster said. “I didn’t feel that way in the most recent number — I feel more conviction that this is going to work, but there’s still this powerful, credible bear case that’s not going to go away, at least not in the next six months.”

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