Tesla Motors Inc. (TSLA): Why Elon Musk Was Right About the Stock Price Being High?


Elon Musk, the CEO of Tesla Motors Inc. (NASDAQ:TSLA), has admitted recently that the stock of his company might be overpriced. Musk’s sentiments caused the company’s stock to plummet by 1.4% last week, but the news looks to have faded away, as the stock is further advancing.  A post on USA Today Money highlights some of the key points that short term traders ought to pay a closer watch on, before making a move on the stock.

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Tesla Motors Inc. (NASDAQ:TSLA) is currently trading at 133 times its expected earnings for the next 12 months. Making the stock extremely pricey and even more intriguing close to Ford Motor Company (NYSE:F)‘s 11.1 forward P/E. Tesla, when compared to Ford Motor Company (NYSE:F) remains the favorite to grow faster, but commanding a P/E that is more than twice that of Facebook Inc. (NASDAQ:FB) raises lots of questions. Facebook is enjoying a robust growth, so Tesla’s 133 P/E when compared to that of Facebook’s 43, should raise some red flags.

Tesla Motors Inc. (NASDAQ:TSLA) is not an established brand when compared to other companies that have been in the space for a much longer period. When ranked in terms of Price-to-book value, it would be extremely impossible to rank Tesla as more valuable compared to Ford Motor Company (NYSE:F) or other companies that have been on the market for much longer.

Investors are already being forced to pay $32.70 for every $1 of Tesla Motors Inc. (NASDAQ:TSLA)’s tangible assets way up compared to $2.50 that investors are paying at Ford Motor Company (NYSE:F). Analysts at Wall Street may in a way be right on remaining bearish on any stock that commands high growth rates. This year analysts may have achieved one right thing about Tesla Motors Inc. (NASDAQ:TSLA), which is currently trading at the $281 mark, which is 6.7% above its 18-month average price target of $263.47.

Ford Motor Company (NYSE:F), on the other hand, is trading at the $16.77 margin, an impressive margin to analysts as it is 21% shy of its 18-month share price target of $20.21. Musk sentiments could potentially cement the fact that the stock might be overpriced taking into consideration the three highlighted points; in this case it is only a matter of time before finding out whether the stock has gas to move even higher in the market.

Andor Capital Management, led by Daniel Benton holds 1.25 million shares worth $300.08 million of Tesla Motors Inc. (NASDAQ:TSLA) as at the end of the second quarter of 2014.

Disclosure: none

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