As Tesla’s (NASDAQ:TSLA) stock price continues its meteoric rise, up 400% year-to-date and 820% year-over-year, one investment strategist is sounding the alarm on the stock, calling it a house of cards waiting to “fold”.
David Trainer, the CEO of investment research firm New Constructs, told CNBC’s “Trading Nation” last week that Tesla’s stock price is “a big, big – one of the biggest of all time – houses of cards that’s getting ready to fold.”
“Whatever best-case scenario you want to paint for what Tesla’s going to do – whether they’re going to produce 30 million cars within the next 10 years, and get in the insurance business and have the same high margins as Toyota, the most efficient car company with scale of all-time ; even if you do believe all that is true,” he said, “the stock price is still implying that profits are going to be even bigger than that.”
At a current average selling price of $57K and assuming 10.9 million car are sold by 2030, Tesla’s market share is only 42%, Trainer noted.
Trainer also said Tesla’s recent stock split that brought the ticker’s previously sky-high pps of $2,230 down to $446 on Aug. 31, could prove dangerous to new investors getting into the stock.
“Stock splits are inconsequential to value…honestly, I look at the stock split as a way to lure more unsuspecting, less sophisticated traders into just trying to chase this stock up and that is not a real strategy,” he said.
While Trainer credited Tesla’s CEO, Elon Musk for making electric vehicles (EV) more mainstream, the company’s weak fundamentals — Tesla has posted net losses for years before the 2nd quarter/20 which marked the company’s 4th quarter of sequential profitability — means he wouldn’t touch the stock.
“Tesla doesn’t rank in the top 10 in market share, or car sales, in Europe for EVs and that’s because the laws changed in Europe that have strongly incentivized the incumbent manufacturers to crank up hybrids and electric vehicles, Trainer said. “The same is coming in the United States. I think realistically we’re talking about something closer to $50, not $500, as a real value.”
TSLA Price Action
Tesla shares closed 6.45% lower at $391.33 on Friday, marking their fourth straight day of declines. The stock, which has boosted the electric-car maker’s market cap to about $390 billion, trades at 159x forward 12-month EPS estimates. US markets are closed on Monday for the Labor Day holiday.