Tesla shares in bubble territory amid rumors of Apple cars, researcher says

LONDON —Tesla shares are overpriced and in bubble territory compared to performance, according to Vitali Kalesnik, partner and head of research in Europe at Research Affiliates.

“While Tesla is a great company, Tesla stock is showing very strong signs that they are overpriced,” Kalesnik told CNBC’s “Squawk Box,” shortly after a report that Apple is once again planning to produce its own electric car. driving technology.

Tesla’s stock price before the market opened on Tuesday was $ 649.86, and the company is currently valued at $ 616 billion, more than the nine largest automakers combined.

Kalesnik believes Tesla’s current stock price is too high given its sales figures, car production numbers and other fundamentals. “When we look at the kinds of assumptions we need to justify these valuations, we need very, very aggressive assumptions,” he said.

Tesla’s margins are “broadly comparable” to the rest of the industry, and Kalesnik said this means “Tesla’s current valuation is in the bubble zone.”

Tesla’s stock price is up more than 650% in 2020, with several major events that helped boost the company’s stock. In May, Tesla started production at its Gigafactory in California after a pandemic-related shutdown and a legal battle with the state. In July, Tesla posted its fourth straight quarter in profit and exceeded delivery expectations. Shares also received a boost at the end of the summer when Tesla announced the very first stock split.

Tesla shares soared after the electric car maker announced it debuted on the S&P 500, a stock market index that measures the performance of 500 major companies listed on US stock exchanges.

“If it is included in the S&P 500, investors will have to buy it at a very high price, and that will probably have some pretty bad consequences for investors,” said Kalesnik.

Tesla shares plummeted on Monday when it debuted on the S&P 500 and the stock ended 6.5% lower than a record high in the previous session.

Optimism for Tesla’s stock was tempered after Reuters reported that Apple plans to start manufacturing an electric passenger vehicle by 2024. New technology in the Apple car could significantly reduce the cost of battery production and increase its range, Reuters reported. Apple declined to comment.

While an Apple car may be years away, there are other companies that already produce a significant number of electric vehicles. But Kalesnik believes investors are not fully aware that there is competition in the EV market.

“Tesla has a number of advantages in the EV market and many of its competitors admit that,” said Kalesnik. That said, its competitors have a significantly larger payout [together] very aggressive, multi-billion dollar plans to enter the market. Volkswagen is already producing. Toyota has serious plans and recently it came out with its advancements in the solid-state battery, which would revolutionize the EV industry. “

Despite his concerns, Kalesnik said he would not recommend shorting Tesla’s stock. “The bull market for Tesla can last longer than your capital and your appetite for shorts,” he said. “But given the volatility, you can burn very significantly.”