Is Tesla Motors Inc. (TSLA)’s Valuation a Reason for Concern?


Tesla Motors Inc. (NASDAQ:TSLA)’s valuation has become a major concern as the company’s stock has gone through an impressive race. However, the main question that arises now is whether or not Tesla’s stock is overvalued. Today the stock has picked up around 2%, following a significant downfall that it experienced after Morgan Stanley (NYSE:MS) and the company’s CEO, Elon Musk, said that the stock is, in fact, priced too high. The main concern, according to CNBC’s Allen Wastler is the fact that the stock was going to too far, too fast, then it should.

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“Tesla Motors Inc. (NASDAQ:TSLA) stock kind of took a 9% pounding today based of a note from Morgan Stanley saying the stock is basically going too far too fast. Off course CEO, Elon Musk, said the same thing last week,” said Mr. Wastler.

Morgan Stanley (NYSE:MS)’s Adam Jonas statement did not go well with investors at Wall Street as the stock slumped by $25.34. Jonas pointed out that electric vehicles were falling on the global scale thus, it was unrealistic for Tesla Motors Inc. (NASDAQ:TSLA) to command such a hefty price tag.

Tesla Motors Inc. (NASDAQ:TSLA) has mostly been banking on growth in China, which Jonas remains skeptical about. Battery costs continue to be another headache for the giant electric company as they are contributing a lot, to cars being relatively expensive for the mainstream markets. Tesla Motors Inc. (NASDAQ:TSLA) is barely weeks into signing an agreement with the state of Nevada for the construction of its proposed Giga-battery factory.

The construction of the factory is expected to take some time meaning, Tesla’s vehicles will continue being expensive in the short-term. Technological breakthroughs are also considered as other impediments that may hamper Tesla Motors Inc. (NASDAQ:TSLA)’s growth in the industry. Google Inc. (NASDAQ:GOOG) and General Motors Company (NYSE:GM) stable financial backing means they can realize the driverless cars over a short period of time resulting in increased competition for Tesla’s electric vehicles.

Despite the remarks, Jonas reiterated that Tesla Motors Inc. (NASDAQ:TSLA) is still the world’s most valuable automaker, emphasizing that investors should not always expect the stock to rally in the market.

Andor Capital Management, led by Daniel Benton held 1.25 million shares of Tesla at the end of the second quarter of 2014. The position represents 16.27% of Daniel Benton’s equity portfolio.

Disclosure: none

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