TSLA's Missed Opportunities
The Credit Strategist Blog
In a few days, I will publish the January 2023 issue of The Credit Strategist that includes my 2023 forecast. When I started working on that forecast in early December, TSLA was trading at ~$190/share (it started December at $194.70/share). At that time, I thought the stock would fall under $100/share next year but that may happen before the end of 2022. Price has a habit of affecting sentiment so I am going to lower my target further. As this is written in the after hours on December 27th, TSLA is trading down below $108/share, a loss of ~45% in less than a month and a market cap loss of ~$275 billion. This breathtaking collapse of one of the most overvalued stocks in history - and certainly the most overvalued mega-cap stock in history - was long in coming for those of us who still believe that markets eventually come to their senses.
Unless something drastic occurs to change investor sentiment, it certainly appears that TSLA is heading much lower. At its current $344 billion market cap, it is trading at ~20x projected earnings and ~33x current earnings and 21.5x current EBITDA. This is a much higher multiple than other automakers that all trade at multiples of less than 10x earnings (F and GM trading at 5x and 5.7x, respectively).
Leaving aside myriad questions about TSLA’s accounting, which inflates its earnings and EBITDA, and ignoring the fact that the company still earns a meaningful but declining profit from regulatory credits, the stock is still very expensive even after losing $850 billion of market cap since its peak in November 2021. Investors should be wary about being lured into the name just because it is no longer insanely overvalued and is now only significantly overvalued.
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