Although Tesla shares may gain 400% this year, according to the one investment researcher, it is risky.
David Trainer, New Constructs CEO, says that Tesla has the most dangerous stock on Wall Street and advises the fundamentals do not support such a high price and valuation.
On Thursday, August 3, David Trainer made a statement that whatever best-case scenario will be imagined for what Tesla is going to do, the stock price still implying that profits will be even higher than that. Even the scenarios where Tesla will produce 30 million cars, get in the insurance businesses and have the same high margins as Toyota.
He reports that the stock price is implying anywhere from a 40% to 110% market share based upon the average selling price. Trained also says that at its current average selling price of $57,000 and 10.9 million car sales by 2030, that implies 42% market share.
Tesla trades at 159 times forward earnings.
He adds that its recent stock split could also is risky to new ventures getting into the stock.
Tesla shares fall as the largest shareholder trimmed its stake.
On August 31, Tesla split its stock five to one, and shares rallied 12%. However, the stock dipped last week by more than 5% after its largest outside shareholder Ballie Giffors cut holding.
According to Trainer, a more realistic valuation would be far lower than current levels.
The Trainer said that Tesla does not rank in the top 10 in market share or car sales in Europe for EVs. He thinks the reason for it is that laws changed in Europe that encouraged the manufacturers to crank up hybrids and electric vehicles. Trainer reported the same is coming in the U.S., and we’re talking about something closer to $50, not $500.
Trainer does credit Tesla CEO Elon Musk and the company to promote the trend and make electric vehicles more mainstream.