Shares in this article
indices in this article
• Tesla shares with real price fireworks
• Cornell Capital believes valuation is detached from fundamentals
• Three scenarios show where Tesla shares could go
No question about it – things can hardly be better for Tesla at the moment. The electric car maker has now been in the black for five quarters in a row, and the delivery figures have also continuously exceeded the goals the company has set itself Elon Musk himself. This positive development has also driven more and more investors into Tesla shares, which accordingly saw a real fireworks display this year. The Tesla share ended 2019 at a price of $ 83.67. It is currently at $ 649.88, a phenomenal plus of more than 670 percent (as of the closing price on December 8, 2020). Due to the soaring of the paper, Tesla even saw itself compelled to carry out a 1-to-5 share split in the course of the year in order to make the shares at least visually more affordable.
Two messages drove the Tesla rally
But in view of such dizzying heights, how should things go on with Tesla shares? As Bradford Cornell of the Cornell Capital Group recently pointed out in a blog entry, the share certificate is now facing one of three scenarios – none of them good. The rally in the share in the past few months was mainly driven by two reports. On the one hand, the stock split, and on the other hand, inclusion in the broad US S&P 500 index. Both messages, however, have nothing to do with the ability of the US car manufacturer to “produce, sell or maintain cars in a profitable manner”.
Tesla valuation completely detached from fundamental data
On the contrary, the Tesla paper is now so far removed from the company’s fundamentals that it would now exist “in a kind of valuation Twilight Zone”. After all, measured in terms of market capitalization, the e-car manufacturer is now more valuable “than the entire auto industry at the beginning of 2019”. With a current market capitalization of 567.8 billion US dollars, Tesla is even ahead of Warren Buffett’s investment vehicle Berkshire Hathaway (542.4 billion US dollars), only that Berkshire reported EBIT of 106 billion US dollars in the last fiscal year while that from Tesla amounted to -0.6 billion US dollars.
That fact in itself is remarkable. In addition, however, Tesla is increasingly having to fight for its market position in Europe.After all, the competition has now also understood that there is great future potential in electric vehicles. In addition, the automobile market is generally tied to the development of the economy and will grow at that pace, if not more slowly. “To justify the current price, Tesla would have to dominate the global auto market in the next few decades and there is little evidence for this,” summarizes Cornell Capital.
The three scenarios
But what does that mean for the future of Tesla shares? In order to be able to set up three future scenarios here, the analysis company took a closer look at the figures of the electric car manufacturer and derived a basic, a bear and a bull forecast from them. Spoiler: None of the scenarios predict a further price increase for Tesla.
For the baseline scenario, Cornell Capital Group anticipates “rapid growth and industry-leading operating margins for Tesla”. In that case, Tesla stock should land at $ 144.71. Measured against the current share price, this would mean a hefty loss of 77 percent. The bull scenario also assumes stronger growth, but only comes to an implied share price of 301.11 US dollars. And then there is the bear scenario, which continues to assume that Tesla is a “successful carmaker”, but sees the price at only 72.71 US dollars – a discount of almost 89 percent. According to Cornell Capital, this analysis shows that “Tesla is not only overrated, it is unleashed”. So what to do if the stock market experts have their way? Short sell Tesla stock.
Finanzen.net editorial team
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