Tesla stock TSLA is cheaper compared to Saudi Aramco, said ICAP Technical Analysis

Saudi Aramco officially the Saudi Arabian Oil Company (formerly Arabian-American Oil Company), is a Saudi Arabian national petroleum and natural gas company based in Dhahran, Saudi Arabia. It is one of the largest companies in the world by revenue, and according to accounts seen by Bloomberg News, the most profitable company in the world. Saudi Aramco has a bigger market cap than the next 10 largest oil companies combined. 

According to Walter Zimmermann, Tesla stock never stops taking heat for how expensive it is, but there is one company that might make it look like a value investor’s dream: Saudi Aramco.

Walter Zimmermann conducts ICAP Technical Analysis. "Saudi Aramco is over-valued by some $740 Billion," he said. A Bernstein survey suggested that Saudi Arabia’s national oil company was worth a touch more than $1.3 trillion, but it was worth some $1.7 billion at its IPO, and even hit the $2-trillion market cap that Saudi Arabia had been seeking.

Here are some explanations to help you understand how big it is. It big enough that you could add the market-capitalizations of the next three biggest oil companies in the world—Exxon Mobil (XOM), Royal Dutch Shell (RDS.A), and Chevron (CVX)—throw in the next seven for good measure and still hit only around $1.4 trillion, Zimmermann explains. Aramco’s share price is so inflated, he says, that its dividend yield will be half that of Exxon and Shell.

ICAP Technical Analysis’ Walter Zimmermann

“I cannot think of a single reason to be long Aramco up here. And I think I have a pretty good imagination,” Zimmermann writes. ”After all, the Aramco owners launched the IPO so they can run away (in fear) from the oil industry and invest elsewhere.” 

Now the hard part: arguing that Tesla is cheap. By most measures, it isn’t. Tesla stock (TSLA) trades at 2.8 times forward sales, to the S&P 500’s 2.3 times, and it isn’t expected to turn a profit so it doesn’t have a forward price/earnings ratio. But using the same methodology Zimmermann used on Saudi Aramco, Tesla doesn’t look nearly as overvalued. As of Dec. 13, Tesla had a market cap of $65 billion, well below that of Toyota Motor’s (TM) $250 million and Volkswagen’s ($100 or so billion, though it is worth more than General Motors (GM), which has a $51 billion market cap, and Ford Motor (F), which has a $37 billion cap. “Tesla is ‘only’ the third largest auto maker by market cap,” Zimmermann writes. “Aramco makes Tesla look dirt cheap.”

Zimmermann apparently sees more potential upside for Tesla. He argues that if Tesla can break $410, then it could trade up to $550. With Tesla stock up 6.4% to $381.42 at 2:08 p.m. Monday, that implies a 44% gain.

Zimmermann acknowledges:
• Tesla is clearly looking rather richly priced up here.
• But meanwhile, my best attempt at an Elliott wave analysis pegs the Tesla stock price as still headed higher.

Featured image: Stockprice

Nothing in this article is intended to constitute a trade recommendation.

I am not a holder of Tesla shares and I am not going to buy them in the next 72 hours.