Tesla Motors CEO Elon Musk will stand for a television interview following his company ‘s first public offering at the NASDAQ market in New York, June 29, 2010.
Brendan McDermid Reuters
LONDON —Tla stock is too expensive and in a bubble range compared to its performance, according to Vitali Kalesnik, European Affiliates partner and head of research at Research Affiliates.
“As long as Tesla is a good company, Tesla stock has very strong signs of gaining the upper hand,” Kalesnik told CNBC’s “Squawk Box Europe” on Tuesday, hot on the heels of a report that Apple is back plans to produce its own electric car with self-driving technology.
Tesla’s share price rose nearly 6.5% on Monday. In Tuesday’s premarket, it was trading at $ 653.25, up 0.5%. Its current market value is $ 616 billion, which is more than the nine largest manufacturers combined.
Kalesnik believes Tesla’s share price is too high because of its sales, car production numbers and other fundamentals. “When we look at the types of assumptions we need to validate these valuations, one would need to be very aggressive assumptions,” he said.
Tesla’s margins are “virtually identical” to the rest of the industry and Kalesnik said that means “Tesla’s conventional valuation is in the realm of bubbles.”
Tesla’s share price has risen more than 650% in 2020 with a number of key events helping to build the company’s stock. In May, Tesla began production at its California Gigafactory following a pandemic-related shutdown and a legal battle with the state. In July, Tesla posted its fourth straight quarter of profit and blow delivery estimates. Shares also rose in late summer when Tesla announced its first-ever stock split.
Tesla shares rose to a high level after the electric car maker announced it was debating the S&P 500, a stock market index that measures the performance of 500 major listed companies on U.S. stock exchanges
“When introduced into the S&P 500, investors have to buy it at a very high price, which is likely to have negative consequences for investors,” Kalesnik said.
On its S&P debating day, Tesla shares fell Monday from the peak of the previous session.
Competition from Apple?
Hopes for Tesla stock have been dashed after Reuters reports that Apple plans to start making an electric passenger vehicle by 2024. New technology in Apple’s car could significantly reduce the cost of battery production and expand its range. expansion, Reuters reported. Apple declined to comment.
While an Apple car may be several years away, other companies are already making large numbers of EVs. But Kalesnik believes that investors do not fully understand that there is competition in the EV market.
“Tesla has some advantages in the EV market and many of its competitors acknowledge,” Kalesnik said. “Nonetheless, their competitors have a much larger captain [together] quite aggressively, multi-million dollars are expected to enter the market. Volkswagen already does. Toyota has big plans, and recently came out with its breakthroughs in the solid-state battery, which is supposed to transform the EV industry. “
Despite his concerns, Kalesnik said he would not recommend shortening Tesla stock. “The bull market for Tesla can overwhelm your capital and your desire for the minutes,” he said. “But with the volatility, you can burn a lot.”