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A big

Tesla

bull-bear debate just went down, but most of the ground covered was old news. Investors should be asking different questions about the industry and how

Tesla

can keep growing.

Friday afternoon, The Wall Street Journal hosted the Tesla (ticker: TSLA) event, with Kynikos Associates founder Jim Chanos, a bear, and Gerber Kawasaki Wealth & Investment Management CEO Ross Gerber, a bull.

Chanos is short Tesla, and benefits from the stock going down, while Gerber owns the shares. Investors should realize both men were making the case that would benefit them financially.

To sum up the 45-minute event, Chanos believes Tesla is just a car company, and that its high margins will fall to industry averages over time. He didn’t address benefits to the company that come from its charging network, or the extra margin Tesla gains by functioning as its own dealership network.

Gerber counters that Tesla is more than a car company. He argues that margins can remain elevated as the company realizes benefits from increasing the scale of its car and battery manufacturing, as well as software-related sales and services. He believes Tesla is more like

Apple

(AAPL) than

General Motors

(GM).

That sums up a bull-bear debate that has been going on for a long time.

Beyond the basics, Chanos pointed out that Tesla inventories are increasing in the U.S. and overseas. But that is essentially old news and reflects what happened before Tesla cut vehicle prices around the globe.

Watching demand in 2023, of course, is critical for the stock this year. If Tesla doesn’t deliver more than 1.8 million units, roughly the current analyst consensus, the stock will struggle.

Chanos also believes Tesla should trade at a small premium to other auto makers which trade for single-digit price/earnings ratios and about “three to five times gross profit.” Barron’s disagrees. Auto makers trade for below-average valuation multiples because the industry increases its sales and earnings at rates far lower than the rest of the market, but Tesla grows much faster.

Ford Motor

(F), which Barron’s picked in a 2020 cover story, is expected to generate 2023 sales of about $159 billion, compared with about $160 billion in 2018. Tesla sales in 2023 are expected to be about $110 billion, up more than 30% compared with 2022. In 2018, Tesla generated closer to $20 billion in sales.

If Tesla’s growth stops, the valuation multiple, which is currently at about 27 times 2023 earnings, will fall dramatically. Both men agreed that if Tesla earns $2 a share in 2023, the stock will struggle, but the current consensus estimates for 2022 and 2023 are about $4 and $4.80, respectively.

Gerber, for his part, said nothing would make him a Tesla bear. That’s a very strong stance. A piece of advice Barron’s has taken to heart is that investors should have “strong views held lightly.”

How to value growth companies like Tesla is important, but what really counts for the stock is how fast EVs’ share of new car sales will increase. Battery-electric vehicles represented a little less than 10% of all new car sales around the world in 2022. If EVs hit 20% of new car sales in a few years, Tesla’s sales should at least double from the 2022 level.

Investors should also be watching for new models from Tesla. The average Tesla cost roughly $54,000 in the third quarter of 2022, putting the cars out of the reach of a good portion of buyers. In the U.S. about one-third of the cars sold cost less than $36,000, so Tesla eventually will need a lower-priced EV.

Barron’s is talking our book too. We recommended the stock on Jan. 6, believing shares had declined enough to fully reflect all the challenges of rising rates, more competition, and falling prices.

Tesla stock is up about 16% since then, while the

S&P 500
is down less than 1%. It is way too early to declare who is right about Tesla shares in 2023.

Write to Al Root at allen.root@dowjones.com