Is Teslas stock overvalued?

Is Teslaês stock overvalued?

Last week saw much discussion at the New York Auto Show and elsewhere about Tesla briefly surpassing Ford and then General Motors in its valuation, based on market capitalization (number of outstanding shares multiplied by the stock price). Financial and auto industry analysts agreed that the valuation was based on potential (high) and not on earnings or financial fundamentals (shaky). Where they varied was in assessing whether the potential was enough to justify the stock runup.

Mike Jackson, CEO of AutoNation, called Teslaês stock valuation –totally inexplicable.” He said Tesla might be –one of the greatest Ponzi schemes of all time.” Former GM Vice Chairman Bob Lutz called Teslaês stock price –the ultimate bubble, which is doomed to burst,” according to the Washington Post. Without mentioning Tesla, GM EVP Mark Reuss said that GM has to deliver results and does not have the –luxury” of simply making promises, the Detroit News reported.

But clearly many in the financial community see much promise in Elon Muskês vision of an all-electric car company that makes and sells its own batteries, has an investment in solar power and is working to present itself as a mobility company. The mobility company label is one that some of the more traditional car companies, such as Ford, see as their own future. The question is, can Tesla make money doing all that?

The company has ambitious plans to produce 500,000 Model 3 electric compacts by the end of next year, far more than the 100,000 vehicles it has produced in a year until now. The Model 3 will be introduced later this year.

A few days after the stock valuation news, Musk announced in a series of tweets that Tesla would bring out a semi-truck in September and a pickup in 18 to 24 months. No details were provided.

Download Bulletin PDF