Few companies have been as polarizing on Wall Street as Tesla, and this year’s slump has done nothing to tone it down. For Piper Sandler’s Alexander Potter, the company’s potential dominance in the electric car business warrants a share price target of about $ 1,200, nearly double its close of $ 680.76 on Tuesday. For Craig Irwin of Roth Capital Partners, as rivals accelerate and shrink the lead that made Tesla the world’s most valued auto company, their shares will plunge to $ 150.
The divergence illustrates the tension that has led Tesla shares to drop 4% during the first half of the year , even as rival manufacturers have been overtaking it as they rebounded from the 2020 declines.
That is a In stark contrast to its wild growth last year, which saw it multiply its price by 8, and reflects investors’ doubts about the company’s heady growth expectations in the face of stronger competitive threats and signs of a slowdown in sales. in China.
“For a long time, Tesla was the only credible player in the high-end electric car market, and we’re seeing that start to change,” said JoAnne Feeney, portfolio manager at Advisors Capital Management, who said the current valuation of the company assumes it will become the largest car seller in the US. “It seems like a lot to ask.”
Tesla sold about half a million cars worldwide in 2020, representing a small fraction of the 14.5 million light vehicles sold in the US, and is facing the resurrection of traditional automakers like General Motors, Ford and Volkswagen, which are launching their own lines of electric vehicles. In China, Tesla’s lead over other startups has already started to wane , according to Patrick Hummel, an analyst at UBS group.
That competition poses a different challenge to the company’s bottom line: Tesla has benefited from selling carbon offset credits to other carmakers that haven’t met their emissions targets. But the more its rivals’ EV sales take off, the more that revenue stream will fall.
However, Tesla’s stock valuation is based on the expectation of strong growth, giving it little room for error. It is currently trading at more than 650 times earnings per share, according to data compiled by Bloomberg. An exorbitant number if we compare it with a multiple of 30 for the average of companies that trade in the S&P 500 index.
“Tesla’s market valuation is very optimistic, ignoring the more than 500 EV models that will be on the road by the end of 2025,” said Roth Capital’s Irwin. “Tesla does not operate in a vacuum and many companies have better technology.”
The company will announce its second-quarter delivery figures later this week, a major catalyst that analysts and investors will be eager to hear about.
Waiting for domination
But Tesla bulls are confident the company’s valuation will be justified if it dominates the industry, just as tech giants Alphabet, Facebook and Amazon have taken theirs.
Others simply see it as a pause for Tesla stocks as investors come to terms with the rising valuation that it ended last year, when markets relied heavily on growth stocks to offset the closing of much of it. the worldwide economy. That influx has started to change this year into so-called reflation trading, and funds are more likely to return to equities to benefit from the rally.
Cathie Wood’s Ark Investment Management, who held a 0.6% stake in Tesla as of March 31 and is a fervent supporter of the company, is standing firm in its support despite the stock’s flat performance this year.
Ark expects it to benefit from increased EV sales and sees the likelihood that it will deliver fully autonomous cars in four years. If all goes according to plan, Ark predicts the stock will hit $ 3,000 in 2025, several worlds away from the 150 where it is valued by Roth Capital Partners. Who of the two will be closer?
Leon Cooper was born and raised in Vancouver. As a Reporter for MountainGroveNewsJournal, Leon has contributed to several online publications including Dream House Publications and Granville Magazine. In regards to academics, Leon has got a Post Graduation Degree in Department Of Archaeology from The University Of British Columbia. As a Reporter for MountainGroveNewsJournal Leon Covers International Topics.