What the successful SpaceX launch means for Tesla

Wedbush Securities Managing Director Dan Ives joins Yahoo Finance’s Zack Guzman to discuss the recent docking of the SpaceX Crew Dragon at the space-station and how this could impact Tesla.

Video transcript

ZACK GUZMAN: If you watched over the weekend, it was something to see, folks. SpaceX making history over the weekend, as the first commercial spaceflight company to get humans up to the International Space Station. And as NASA's head Jim Bridenstine noted, it's the first time American astronauts made it up there in a privately made US rocket from US soil.

And it wasn't just a big win for NASA and SpaceX. It could also be considered a big win for Elon Musk, of course, also running things over there at Tesla. For more on how the win could further boost his standing and spill over to positives for the electric automaker, we're joined by Wedbush Securities Managing Director Dan Ives.

And Dan, I mean, it was something to celebrate. It was very exciting to watch. But how does it spill over into a positive for Tesla?

DAN IVES: Look, a historic, obviously, event for SpaceX, and really the US. But when it comes to Tesla, it just speaks to the Musk brand. And that permeates throughout Tesla, especially from a consumer perspective. It speaks to how Tesla continues to, from an innovation perspective, be viewed both in terms of actual production as well as even from a brand awareness, just in another class versus competitors.

And I think if you look what happened here-- and you're seeing the stock reaction too-- this is just another sort of feather in the cap for Musk and the overall brand for Tesla going forward, in my opinion.

ZACK GUZMAN: Yeah, and we've talked about how much he matters for the brand and Tesla. Of course, that's become an issue when he runs into problems on Twitter with the FCC and things like that. Of course, though, did just get a major payday when he talked about how his pay package is set up, make more than $700 million.

So when you look at all this, are there risks associated with that? Because what happens if a Musk departs a Tesla, or has to depart a Tesla, should another issue arise? Is there not a little bit more risk baked in here when we talk about this company?

DAN IVES: Yeah, I think right now, there's a lot more sort of checks and balances put in, with new board members and obviously everything they've gone through the last few years. And ultimately, I mean, Musk is the heart and lungs of Tesla. And I think what you continue to see in terms of battery innovation, what's happening in China, and now even on the brother-sister company SpaceX-- I mean, he continues to just be such an innovator. Obviously one of the world's most innovative minds, and then now it's behind Tesla.

Now it comes down to the million mile battery. And it comes to further driving costs down on the battery side, and the innovation in Cybertruck and others. And that's why Tesla's stock continues to navigate this dark period that we're seeing in terms of the pandemic, because investors look on the other side of the valley-- on the other side of this dark valley. With EV ownership today, if you look penetrations, it's still 3%, 4% global.

ZACK GUZMAN: Yeah, I mean, well, let's dig into China, too, though, because that has increasingly become one of the points of emphasis here when we think about investing in Tesla. As you noted, it's kind of the wild card when we think about the growth story there. You say that it's worth $300 per share in terms of Tesla EV penetration in China ramping up significantly. What is the way to be looking at that, though-- now as we see ramped up tensions between the US and China, how could Tesla potentially get caught? And what are the fears around on that?

DAN IVES: Yeah, and I think they continue to be caught up in terms of the US-China tensions. Although with Giga 3, the build out in Shanghai and everything you've seen there, I mean, they are a little more Teflon-like versus let's say an Apple in terms of these tensions. I think it comes down to just-- they can hit 100,000, 124,000 in terms of the overall demand in China in the first year.

And I think the growth for Tesla is going to be in China. And that's why a big part of the fundamental rally here has been China. That's sort of gasoline in the fuel tank for the bulls here.

And even in this dark environment, we're continuing to see deliveries ramp into May and June. And I think right now, it just speaks to Tesla having some tailwinds, especially coming out of China. And that's why that's such a key market, both in the supply as well as demand side from Musk and Tesla.

ZACK GUZMAN: Yeah, I'm going to let the gasoline in the tank metaphor slide there when we're talking about Tesla, Dan. But when we look at your rating and where do you see the price of Tesla shares going, you've maintained your neutral rating in terms of that case would be around $800 if things are steady. And then you also have the bull case target at $1,350 a share. So, I mean, is that assuming that everything-- that they come out basically on the other side unscathed in terms of tensions with China? Or does that bull case target of $1,350 also include that potential as well?

DAN IVES: I think bull case is China ramps successfully. What I would say is you get to 100,000, 125,000 within that first year, if you start to see the acceleration there and penetration story, I think a big part of the bull case is that China story. And if it all goes with no speed bumps, I think that's where you start to get to north of $1,000 stock into that $1,350 range.

And that's why from a base case, Tesla continues to be one where you have to focus on China best case to get to what I would view is that you're at $1,350 number. And as of right now, the writing's on the wall where they're going in that direction. I think when you look at SpaceX and everything that happened there, it just speaks to the Teflon-like Musk that continues to navigate any storm or anything thrown at him.

ZACK GUZMAN: All right, there you go, optimism on the Tesla front on the backdrop of history being made for his other company, SpaceX. Dan Ives, appreciate you taking the time to chat with us, Wedbush Securities Managing Director. Always a pleasure, sir.