Yahoo Finance Tesla stock is ‘egregiously overvalued’: Analyst
Tesla (TSLA) stock took a nosedive after the electric vehicle giant posted a first quarter revenue and profit miss, and gross margins that dipped below 20% to 19.3%, as the cost of recent price cuts hit profitability. The company's thinning margins has prompted some of Wall Street to go bearish on the stock, with a number of analysts slashing their price targets. Craig Irwin, ROTH Capital Partners Senior Research Analyst, says Tesla is "egregiously overvalued," but the miss was "not unexpected."
Tesla's stock has risen over 160% year-to-date. "Wall Street got a little too bullish," says Irwin. "It's a growth stock, they know they have to keep that growth rate up." CEO Elon Musk stressed that the company will put sales growth ahead of profit in its road ahead, but despite this, Irwin says things will only get worse for the company.
Irwin remains optimistic on the auto sector as a whole, saying he's "quite bearish for the equity, but I think the sector is going to do very well for the long run."
Craig Irwin spoke with Yahoo Finance's Brad Smith and Julie Hyman. Watch the entire interview here.
Key Video Moments
00:00:20: Wall Street "too bullish"
00:00:45: Things will get worse
00:00:58: "Egregious" valuation
Video transcript
CRAIG IRWIN: We've been consistent for a long time saying that 100 new EVs on the market in 2023, EV models from competing producers. There's going to be significant pressure. So there was a correction in the back end of last year when they hit a demand air pocket and when, obviously, the consumer got a little bit weak for them.
You know, Wall Street got a little too bullish. And it's a growth stock, so they know they have to keep that growth rate up. 36% deliveries growth is not all that impressive when they're guiding for 50%. And really it was only 18 on the top line.
Net income declined by 23%. I'm looking at this and I'm saying the 230 basis point miss on margins is not a huge surprise, and things are going to get worse. It's a great company, great products, love the fact that they pioneered this market. But there's a lot of other companies that are going to be successful here too. And the valuation is egregious.
Just the move today at 9%, more or less, is about the entire size of Ford's market cap, to put it in perspective. So egregiously overvalued, not unexpected, and quite bearish for the equity. But sector-- I think the sector is going to do very well for the long run.
