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Bubble Trouble: Stock Analyst Says Tesla Stock Is Overvalued By $1 Trillion

Bubble Trouble: Stock Analyst Says Tesla Stock Is Overvalued By $1 Trillion

Tesla stock

Tesla dealership in White Plains, New York. Photo by: STRF/STAR MAX/IPx 2021 8/16/21

Silicon Valley-based electric vehicle maker Tesla recently saw its market capitalization cross the $1 trillion mark, and its stock could be overvalued by $1 trillion, according to an independent investment-research firm.

David Trainer is the CEO of Tennesee-based New Constructs, an equity research firm that provides valuations for private and public businesses.

Tesla shares could fall as much as 88 percent to roughly $150 a share, Trainer said. Trainer has been bearish about Tesla’s sharp rise in recent years, calling it “the most dangerous stock on Wall Street”. Tesla shares were trading at $1,184 as of this writing.

Tesla became the second-fastest company to hit the $1 trillion valuation mark, reaching it just more than 12 years after its 2010 initial public offering. Only Facebook, which took more than nine years from its IPO to reach $1 trillion, got there faster.

That makes Tesla the sixth company in U.S. history to be worth $1 trillion.

This is not the first time that analysts have said the popular electric vehicle maker is overvalued. In 2020, a Bloomberg report quoted JPMorgan analyst Ryan Brinkman saying that the company’s shares were “dramatically overvalued”.

In April, Roth Capital analyst Craig Irwin said Tesla’s shares were worth $150, which was a 78 percent discount at the time.

Seth Goldstein of Morningstar raised his target price of Tesla stock to $680 from $650 at the end of October after Tesla and Hertz announced that the rental car giant planned to buy 100,000 Tesla Model 3s over the next 14 months. 

“We think much of the good news is already priced into the stock,” Goldstein wrote to his clients.

Other analysts thought Tesla was more than 13-percent overvalued in October and its inclusion in the S&P 500 was questionable.  None of the other stocks included in the S&P 500 can be said to be overvalued more than 10 percent.

But some, like Goldman Sachs analyst Mark Delaney, think Tesla’s share price could go even higher over the next year as demand grows for its electric cars and big expansion plans advance.

Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?