Tesla Analyst Sees Disconnect Between Share Price, EV Company's Fundamentals

The unprecedented run-up in Tesla Inc TSLA stock has made sell-side analyst wary about its future trajectory.

The Tesla Analyst: Needham analyst Rajvindra Gill maintained an Underperform rating on Tesla. 

The Tesla Thesis: Tesla shares have risen 348% year-to-date versus a 7% advance by the S&P 500 Index during the same time period, Gill said in a Monday note. 

During two critical points in time for the shares — the July 2019-March 2020 timeframe and March 2020 until now — Street estimates did not move in step with the stock price, the analyst said.

In some cases, the estimates actually declined, he said.

Between July 2019 and March 2020, when the stock appreciated by 386%, consensus estimates for calendar year 2020 revenue increased by only 4%, while non-GAAP EPS estimates fell by 36%, Gill said.

From March 2020 until now, the stock — though it bottomed at $72 during the March sell-off — resumed its rally and has appreciated 490%, the analyst said.

This compares to a 12% increase in calendar year 2021 revenue consensus estimates and a 25% increase in non-GAAP EPS estimates, he said. 

This has created a further disconnect between the price and the stock's underlying fundamentals, Gill said. 

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A 10-year, discounted cash flow-based intrinsic analysis of Tesla shares would present a fair picture, Gill said, by stretching beyond the quarter-by-quarter outlook for a stock that's touted as a secular long-term story.

A total 10-year sales compounded annual growth rate of 21% to 2029 is likely, the analyst said.

The growth rate would imply that Tesla would become the No. 1 car manufacturer by units sold at about 4 million cars at a blended ASP of $41,000, he said. 

The DCF analysis yields a share price of $365, or 14% downside when discounting back to today's levels, Gill said. 

"In the relative near-term (CY22), even when applying a leading tech P/E multiple of 50x on a bull-case EPS estimate, we derive a share price of $330 or 24% downside from current levels." 

TSLA Price Action: At last check, Tesla shares were adding 1.93% to $442.38. 

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Photo courtesy of Tesla.