Jul 20, 2023
Should you buy Tesla's stock? Market experts weigh in
, BNN Bloomberg
Tesla has unvervalued lines of business beyond cars: Portfolio manager
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As shares of Tesla suffered Thursday after the company reported potentially profit-hindering challenges, experts offered varied perspectives on the carmaker’s long-term outlook.
While the carmaker reported revenue was up 47 per cent from the same time last year, and its car deliveries exceeded Wall Street expectations — but margins came at 18.2 per cent, hitting a four-year low, the company’s Wednesday earnings showed. Weighing on the quarter were months of markdowns with the risk of further discounts ahead.
The momentum behind Tesla's stock was ushered in by investors throughout the pandemic, but one market expert believes the hype can’t last.
“(The results are) confirmation that the business is just not as good as people want to believe, and not nearly as good as what you have to believe to justify the current stock price,” David Trainer, founder and chief executive officer of New Constructs, told BNN Bloomberg in an interview on Thursday.
Trainer argues that Tesla’s current market valuation does not match the company's fundamentals and has a target price for Tesla’s stock to return to US$26.00.
Tesla's share price as of late-morning trading was $273.25.
“At these super elevated levels, the stock is implying that this business is going to be the most profitable car company of all time by multiple factors — and own upwards of 50 to 60 per cent market share in 10 years,” he said.
Trainer said he doubts Tesla’s ability to reach this kind of success. He also pointed to the weakness in its self-driving technology and subscription-based business model, as the EV maker has already fallen behind several other firms in these races, and is now facing heightened competition, he added.
“When is comes to subscriptions, all of these EV vehicles are going to be computers on wheels. So, that’s not something that’s unique to Tesla. All of the other providers, and there’s a lot of them, can to do the same thing,” he said.
Will McDonough, founder and lead portfolio manager at EMG Advisors, disagrees.
“Tesla’s not a car company,” he said.
McDonough pointed to Tesla’s growth potential as a leader in EV infrastructure and user engagement as business features that could set it apart from other car manufacturers.
“One line of Tesla’s business is cars so that people are attracted to a sexy model X and want to drive it — but what they’re really doing is Trojan horsing in EV battery adoption, driving adoption of a platform that will require subscription, that will require charging, and that will require engagement,” he argued.
Ultimately, he believes Tesla could become the industry’s leading provider for infrastructure technology to build electric cars for all car companies.
“Do not try to trade this on fundamentals,” he said.
While the carmaker reported revenue was up 47 per cent from the same time last year, and its car deliveries exceeded Wall Street expectations — but margins came at 18.2 per cent, hitting a four-year low, the company’s Wednesday earnings showed. Weighing on the quarter were months of markdowns with the risk of further discounts ahead.
The momentum behind Tesla's stock was ushered in by investors throughout the pandemic, but one market expert believes the hype can’t last.
“(The results are) confirmation that the business is just not as good as people want to believe, and not nearly as good as what you have to believe to justify the current stock price,” David Trainer, founder and chief executive officer of New Constructs, told BNN Bloomberg in an interview on Thursday.
Trainer argues that Tesla’s current market valuation does not match the company's fundamentals and has a target price for Tesla’s stock to return to US$26.00.
Tesla's share price as of late-morning trading was $273.25.
“At these super elevated levels, the stock is implying that this business is going to be the most profitable car company of all time by multiple factors — and own upwards of 50 to 60 per cent market share in 10 years,” he said.
Trainer said he doubts Tesla’s ability to reach this kind of success. He also pointed to the weakness in its self-driving technology and subscription-based business model, as the EV maker has already fallen behind several other firms in these races, and is now facing heightened competition, he added.
“When is comes to subscriptions, all of these EV vehicles are going to be computers on wheels. So, that’s not something that’s unique to Tesla. All of the other providers, and there’s a lot of them, can to do the same thing,” he said.
Will McDonough, founder and lead portfolio manager at EMG Advisors, disagrees.
“Tesla’s not a car company,” he said.
McDonough pointed to Tesla’s growth potential as a leader in EV infrastructure and user engagement as business features that could set it apart from other car manufacturers.
“One line of Tesla’s business is cars so that people are attracted to a sexy model X and want to drive it — but what they’re really doing is Trojan horsing in EV battery adoption, driving adoption of a platform that will require subscription, that will require charging, and that will require engagement,” he argued.
Ultimately, he believes Tesla could become the industry’s leading provider for infrastructure technology to build electric cars for all car companies.
“Do not try to trade this on fundamentals,” he said.
