Tesla, Inc. TSLA continued to push higher and completed a nine-session run on Monday and the strong gains have left bearish analysts even more uncomfortable with the company’s rising valuation.
What Happened: Tesla is clearly riding the momentum of better-than-feared second-quarter deliveries number but it should be noted that sales were down 5% year-over-year in the June quarter on top of the 9% drop in the previous, said Bernstein analyst Tony Sacconaghi in an interview with CNBC.
The stock is trading at 125 times earnings, the analyst said, adding that there is anticipation things may get a little better but they are still not good. The analyst sees the momentum continuing into the robotaxi event scheduled for Aug. 8.
“This is meme-like quite frankly. The valuation is disconnected from the fundamentals,” Sacconaghi said. The stock is supposed to earn $7 in earnings this year but consensus estimates are now $2, he added.
“It’s really about enthusiasm that things may get better and that Tesla may say something really exciting at its robotaxi announcement.”
“But at the end of the day, stocks get measured on cash flows and future cash flows and we just see a disconnect between what that earnings and cash flow of power is in the company's current share price.”
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Why It’s Important: Tesla shares have come back strongly from an extended lean patch amid expectations that the auto business’ fundamentals may have bottomed out and confidence in some of its ancillary businesses.
The second-quarter outperformance relative to estimates was achieved on the back of easy financing options made available to buyers. It remains to be seen if delivery growth will resume in the coming quarters.
Future Fund’s Gary Black said over the weekend that Tesla should separately report metrics for its AI & robotics business in order for portfolio managers to include the business in their valuation models. Tesla bull Cathie Wood-run Ark Invest’s new valuation framework announced last month shows the bulk of revenue, EBITDA, and valuation coming from the robotaxi business.
Tesla ended Monday’s session up 0.56% at $252.94, according to Benzinga Pro data. Since June 25, when the recent rally began, the stock has gained 38.5%. It is up 1.8% so far this year.
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