Even Elon Musk on a couple of occasions has basically said that Tesla (TSLA) stock is too high. One time was about a year ago when it was much lower than it is today. As he said at that time, people were putting a lot of faith into Tesla reaching all of its goals.
This week, Elon noted investors do get carried away with Tesla stock. “I think our stock price is kind of high right now,” Musk said. “If you care about the long term, Tesla, I think the stock is a good price. If you look at the short term, it is less clear.”
That’s the most CEO-like I’ve seen Elon, where he basically seemed to catch himself from saying that the stock was clearly overvalued and protected the stock price a bit more with a more standard CEO-like statement.
There’s no doubt about it: you need to be looking at the long term if you are holding onto or buying Tesla stock. And you need to be assuming that everything is going to go super swell for Tesla.
A recent comment on the GM-Volt forum caught my eye for some context it added:
It is a tangent on this thread, but the shareholder cultures of Tesla and GM are perhaps more different than the car owners. GM’s would never suffer the consequence of a head-long push into electric mobility. Neither would any of the others. How else do you think Stifel could come out with a $400 price target, on TSLA, in a report this week based on earnings of $8 a share? That is paying $400, to earn $8 (in 2017), when history tells us a fair price for a car company earning this type of figure would be around $120 (15 p/e), and that is for earnings next year. This may be greek, to some, but it tells us something about what Tesla investors are willing to tolerate, in support of a different mission. There may be bumps in the road ahead, but I think it is magnificent how much investment philosophy is revisiting “corporate mission”.
Some very interesting points there:
- Honestly, as much as us EV enthusiasts have called for the big auto companies to go into the EV revolution with more aggression and enthusiasm, how well would their (older, more conservative) shareholders really be into that?
- $400 a share on a projected $8 per share earning in 2017. Yep, this is not a short-term or medium-term investment. This is a long-term investment. This is assuming that Tesla absolutely crushes its goals. I think it will. I’m as much a Tesla fan as anybody. However, as an investor, I wouldn’t jump in on TSLA right now, and I’m surprised there’s that much investor appetite for that kind of 2017 ratio.
- It is really great to see such strong investor appetite in such a company.
- However, it’s hard to believe that the bottom won’t drop out at some point when the stock stops rising, and when people realize that it’s going to be a long time again before it is going to rise.
- Or people will just keep investing based on each major and minor announcement Tesla makes (most of which were in Tesla’s playbook many years ago, so shouldn’t come as a surprise), and Tesla’s stock price will remain massively inflated for many years.
We’ll see. My personal opinion and approach is: put your money on undervalued solar stocks that have a ton of room to deservedly rise, and either wait for Tesla stock to drop to a more reasonable level or let the TSLA enthusiasts playing up in the clouds there enjoy the wild ride.
No one ever said the stock market was logical. And no one ever definitively said at what timeframe we should be investing in a company.
Addendum: By the way, here’s a max view of the Tesla stock price:
And here’s a view from the past year:
Many people are calling TSLA a “momentum stock.” If that’s what it is, I’d take note that the momentum is still there but it has slowed a lot.
Another GM-Volt forum member noted: “It [sic] just interesting to me that the market seems to have Model X and Model 3 success priced in several times over. With each incremental piece of news about those it climbs further.” Ditto. However, I think those days may be coming to an end. We’ll see. If not, the Tesla stock price might just get up to $400 per share.