Tesla Motors CEO Elon Musk poses during a television interview following his company’s IPO on the NASDAQ market in New York on June 29, 2010.
Brendan McDermid | Reuters
LONDON – According to Vitali Kalesnik, Partner and Head of Research in Europe at Research Affiliates, Tesla stock is too expensive compared to its performance and is in the bubble zone.
“While Tesla is a great company, Tesla stock has very strong signs of overpricing,” Kalesnik told CNBC’s “Squawk Box Europe” on Tuesday, shortly after a report that Apple is again planning to produce its own self-driving electric car Technology.
Tesla’s share price slipped nearly 6.5% on Monday. On Tuesday’s premarket it was trading at $ 653.25, up 0.5%. The current market value is $ 616 billion, more than the nine largest automakers combined.
Kalesnik believes Tesla’s stock price is too high given its sales, auto production numbers, and other fundamentals. “If we look at the kinds of assumptions that we need to justify these assessments, it would take very, very aggressive assumptions,” he said.
Tesla’s margins are “broadly on par” with the rest of the industry, and Kalesnik said “Tesla’s current valuation is in the bubble”.
Tesla’s share price rose over 650% in 2020. Several important events helped raise the company’s shares. In May, Tesla started production at its California facility after a pandemic shutdown and litigation with the state. In July, Tesla posted a profit for the fourth straight quarter, beating estimates for delivery. Shares also got a boost in late summer when Tesla announced its first stock split.
Tesla stock hit a record high after the electric automaker announced it was debuting on the S&P 500, a stock index that measures the performance of 500 major publicly traded companies in the United States
“If it’s in the S&P 500, investors have to buy it at a very high price, and that is likely to have pretty dire consequences for investors,” said Kalesnik.
On their S&P debut day, Tesla shares fell from a record high in the previous session on Monday.
Optimism for Tesla stock was tempered after Reuters reported that Apple plans to begin producing an electric passenger car by 2024. New technologies in the Apple car could significantly reduce battery production costs and extend range, Reuters reported. Apple declined to comment.
While an Apple car could be several years away, other companies are already producing significant numbers of electric vehicles. However, Kalesnik believes that investors do not fully appreciate the competition in the EV market.
“Tesla has some advantages in the EV market and many of its competitors admit it,” said Kalesnik. “However, the competitors have significantly higher cap expenditures. They bet [together] Very aggressive, multi-billion dollar plans to enter the market. Volkswagen is already producing. Toyota has serious plans and recently released its solid-state battery advances set to revolutionize the EV industry. “
Despite his concerns, Kalesnik said he would not recommend shorting Tesla’s stock. “The bull market for Tesla can outlast your capital and your appetite for shorts,” he said. “But given the volatility, you can burn very hard.”