America’s snazziest EV is up 40% this year. And while you’ll be hard pressed to find one on a road outside of California, Tesla is growing in new, high tech areas like solar, power generation and Elon Musk’s pet project, the hyper loop. Tesla wants to be more than just a vehicle manufacturer. And perhaps this is why it has a bigger market cap than Ford by about $3 billion. But guess who sells way more cars and trucks than Tesla?
Florida based ValuEngine says its time investors take profits on Tesla. ValuEngine runs a proprietary model that seeks out undervalued stocks that are “not cheap for a reason”. On the flip side, the model finds stocks that are getting too expensive based on a number of factors including price-to-book, and sales ratios. Tesla continues to lose money despite sales of $7 billion last year.
ValuEngine put out their sale call out on April 13. The stock is up roughly 1% since then and has lost about $5 billion in market cap since April 10. Back then it had around $53 billion in market cap. It’s $48.3 billion currently. ValuEngine models are convinced: Tesla underperforms the benchmark for the next 12 months.
Investors love Tesla. They see Musk as building a transportation company of the future. Thanks to the star power of its billionaire owner, investors are willing to pay around 270x forward earnings for it, rather than 6x for GM or 7x for Ford.
“That’s a big assumption for any company, let alone one whose products–with the exception of the cars it can produce–are largely speculative, unproven, and far from being market ready,” says Steve Hach, an investment writer for ValuEngine. Hach basically translates ValuEngine’s Ivy League quant brain into digestible bits of tradable info.
On the market cap side of things, Tesla’s market cap is like Musk’s hyperloop: science fiction.
Tesla reportedly sold only 76,000 cars last year while Ford sold 2.6 million and GM sold over 3 million vehicles.
“Our models do not run on sentiments, hope for the future, or any other subjective measures,” says Hach. “They can only digest hard financial data like earnings, past price movements and other things. So, despite bullish investor sentiment, we do not rate this company as a worthy investment right now. Their valuation is particularly worrisome.”