In a note to clients, Bernstein analyst Toni Sacconaghi downgraded the stock of the electric vehicle giant to $900.
Tesla is currently trading around $1500 premarket, after a +8.65% rally yesterday. The stock has been super volatile since last week Wednesday after Tesla reported positive Q2 earnings, beating all wall street estimates.
Sacconaghi downgraded the stock to underperform from market perform on Tuesday in a note to clients, with a $900 price target, which is about 40% downside from yesterday’s closing.
As reported by MarketWatch, “Despite our relatively bullish stance on electric vehicle evolution, and structural advantages we believe Tesla may hold, we find it difficult to justify Tesla’s current valuation even under our most bullish/imaginative scenarios,” he wrote in a note to clients. Saccaonaghi said he understood the bull case on Tesla, involving the company’s market leadership in an underpenetrated industry and Tesla’s potential for margin expansion, but called the current valuation “mind-boggling” as “Tesla now even looks expensive versus large-cap growth tech.” He said the company’s enterprise value is currently the same as that of Toyota Motor Corp. and Volkswagen AG while those companies make a collective 20 million cars versus Tesla’s 500,000. “To be clear, we are not calling on investors to short Tesla’s stock, which – given recent price momentum – would probably be equivalent to us recommending investors to step in front of a barreling freight train,” Saccaonaghi wrote. Instead, he is “merely noting that on a 12 month time horizon (and even more so, a multi-year time horizon), it has become increasingly difficult for us to imagine how Tesla’s stock can continue to outperform the S&P500, mirroring our broader skepticism about the sustainability of the growth’s outperformance in the tech sector amid the current once-in-a-decade widening of valuation spreads.”
Tesla market cap. is now $285 billion, with trading volume above 16 million.
There are presently 17 analysts with NEUTRAL, 5 analysts with BEARISH, 5 analysts with VERY BEARISH, only 1 analyst with BULLISH, and 5 analysts with VERY BULLISH ratings.