Tesla (TSLA) was one of the hottest stocks of 2020, with stock prices skyrocketing 582% this year. But at least one analyst says the company’s electric vehicle price is too high, stating it should be between $ 60 and $ 80, rather than more than $ 600 per share.
Gordon Johnson, founder and CEO of GLJ Research, told Yahoo Finance Live Monday that Tesla’s high valuation will soon collapse, with a number of factors weighing on the company’s stock price.
Those include Tesla’s upcoming addition to the S&P 500, scheduled for December 21, which Johnson says could see shareholders putting money in the stock ahead of the anticipated event, withdrawing, and the loss of government-backed EV (electric vehicle) credits from rival car manufacturers.
Johnson believes Tesla’s stock should be viewed as related to overheated stocks such as cannabis company Tilray (TLRY), which saw a massive rise to nearly $ 150 per share in late 2018 and then fall back to $ 7.37 per share. He also places Tesla in the same ranks as renewable energy company SunEdison, which filed for bankruptcy in 2016 after seeing its stock price rise more than $ 32 a share to drop 99% in 12 months.
“You’ve seen this before. I know it sounds crazy, look at Tilray, look at SunEdison, look at Suntech, some of these stocks went from $ 5 to $ 300 dollars, back to $ 5. They went from $ 2 to $ 300 back to zero, ” Johnson said. “It does happen, and we think Tesla is an excellent candidate.”
Tesla’s stock is notoriously as polarizing as its CEO, Elon Musk. In November 2018, Musk told “Axios on HBO” that the company was “one-digit weeks” away from death during the rise of Model 3 production. Prior to that interview, in August 2018, Musk had tweeted that he was taking Tesla privately for $ 420 a share and that funding was secured, although it wasn’t. The Securities and Exchange Commission sued Musk over the tweet, and he and Tesla agreed to pay $ 40 million in fines.
This year, Musk may have raised some eyebrows again when he decided not to use the Model S and Model X production lines for 18 days from December 24 to January 10. Johnson called the decision “baffling” in light of recent suggestions from Musk that Tesla should ramp up production.
“Just a few days ago, Elon Musk sent an email, an internal email that was leaked to the public, saying that production was in fact limited and that they needed to increase production significantly,” Johnson said. “… So I think it’s one of two things: a, demand is a problem, or b, they need to rebuild or refurbish the model to make it more attractive.”
But not all analysts see Tesla as a risk
However, other analysts see Tesla as a story of continued growth. Earlier this month, the company tapped $ 5 billion in stock markets to fill its “war chest” and ensure it can build its factories and reduce its debt. In a recent research note, Wedbush analyst Dan Ives said relocation alone helps reduce the bear case against Tesla.
“Musk and his red cape are raising enough capital to get the balance sheet and capital structure to further solidify his growing cash position and slowly get out of debt, throwing the dragging tesla for Tesla out the window for now,” Ives wrote.
For its part, Johnson views such bullish sentiment around Tesla as unfounded, suggesting that Wall Street analysts have deliberately underestimated Tesla’s deliveries so that it will exceed expectations.
According to Johnson, the company estimates fourth-quarter shipments at 180,000, while other analysts say the company will have lower numbers. That, Johnson says, allows Tesla to beat the wider consensus on the street and boost stock.
Aside from the S&P 500 and manufacturing issues, Johnson points out that Tesla is losing market share in China to rivals entering the EV space, with a market share of 12.5% in China from 25% earlier this year.
However, according to Ives, China still offers tremendous growth opportunity for Tesla, who predicts that the country could account for nearly half of its global sales by 2022. Even with domestic players in China “shooting at all cylinders,” Ives said in a 13 comment, Tesla’s flagship Giga 3 factory in Shanghai gives it “a great competitive edge.”
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