An analyst for Jefferies by the name of Philippe Houchois has warned that Tesla’s stock is highly overvalued, and that the company may end up rising far longer to achieve “profitability” than is commonly supposed.
“Achievements to-date and vision are impressive, but we don’t think Tesla’s vertically integrated business model can be scaled up as profitably and quickly as consensus thinks and valuation multiples imply,” Houchois argued in his research note.
Reuters provides more: “Houchois’ $280 price target was well below the median analyst price target of $337.50, according to Thomson Reuters data.
“Musk is counting on the recently launched Model 3, Tesla’s least pricey car, to make the Palo Alto, California company profitable and establish it as the leading electric carmaker ahead of BMW, General Motors, and other long-established players. Wall Street’s confidence in Musk has sent Tesla’s stock up 83% over the past year to record highs.
“… Eight analysts recommend buying Tesla’s stock, while another eight recommend selling, and eight others have neutral ratings, according to Thomson Reuters data. That makes Tesla one of the 10 most poorly-rated stocks in the Nasdaq 100 index.”
With regard to Houchois’ research note…
At this point, I think it should be clear to even the most naive of those who put money into the stock market that “analyst” opinions should be taken with a hefty grain of salt. Who benefits from the perspective presented? Who is paying whom? What are the likely long-term motives for views given? Etc.
All of that said, Tesla’s stock may well be “overvalued” going on achievements to date. Something that seems to elude many analysts nowadays, though, is that some investors may be simply “investing” into a company, rather than gambling on it with short-term gains being the motive.
The current regulatory environment certainly seems to encourage highly lucrative short-term gambling (if you’re lucky) at the expense of actual long-term investment strategies, so this isn’t too surprising. Though, from the perspective of company accountability and good stewardship by execs, it arguably is unfortunate.
So, to expand on that point, a great many of the Tesla investors that I’ve spoken to over the last few years have been putting money into the company’s stock partly out of the belief that the company is doing something that is necessary. In other words, the investors are actually investing something into the company itself, rather than just into their own desire to make a quick buck.
That must be really confusing to people who don’t think that way. Hence the recent fate of those short-selling Tesla’s stock. I will note here, though, so that I’m not accused of being unrealistic, that I think Tesla’s stock likely is overvalued a fair bit at this point — as the whole market itself is. The market as a whole is so heavily rigged and overinflated at this point that I certainly wouldn’t blame anyone for taking money out of any stock, including Tesla’s.