A legendary investor with a strong track record of performance for his funds is betting against electric vehicle leader Tesla Inc TSLA.
While the investor recognized Tesla as a great company, he saw several reasons why shares could go lower.
What Happened: Shares of Tesla were down more than 60% in 2022, marking the biggest annual drop for the company since going public. As a result, short sellers of Tesla made over $15 billion in profits.
Legendary investor Bill Miller sees more pain ahead for Tesla and is short the stock.
Known for his role with Legg Mason Capital Management and now with Miller Value Funds, Miller said increased competition is the main reason why Tesla’s valuation could suffer.
“I shorted it recently. I shorted more (Friday). If it goes up, I’ll short more,” Miller said in an interview on CNBC.
Miller highlighted the market capitalization of Tesla as more than $350 billion, being around two times that of Toyota Motor Corp TM and around seven times the size of General Motors Company GM.
“I just don’t think it's worth more than the top five automakers in the world combined. All of them are coming with electric vehicles.”
Miller also praised Tesla CEO Elon Musk in his interview.
“I think Tesla has been a phenomenal company. I think Elon Musk is a genius.”
Miller sees Tesla losing market share to rivals in the electric vehicle space and also noted price cuts for Tesla in several markets, a potential nod to China.
“Tesla is now losing market share. They’re cutting price. It’s a phenomenal company, but it’s not worth $380 billion, in my opinion.”
Related Link: Apple Overtakes Tesla As The Most Shorted Stock: Here's Why It Matters And Why It Doesn't
Why It’s Important: The comments from Miller were interesting as they pointed to Tesla being a great company and market leader, but showed concerns about valuation and potential competition.
Miller also noted Tesla is a car company and shouldn’t be valued as a technology company, one of the potential reasons its market capitalization had soared above peers in recent years.
“Tesla is much more profitable than the current auto companies,” Miller said. “The earnings multiple if you consider it a tech stock is not out of whack, certainly with its dominance in electric vehicles.”
Miller beat the S&P 500, an index tracked by the SPDR S&P ETF Trust SPY for 15 consecutive years from 1991 through 2005. The strong track record made Miller one of the most recognized investors.
When picking a large cap stock that can outperform the market going forward, Miller turned his attention to e-commerce leader Amazon.com, Inc. AMZN.
TSLA Price Action: Tesla shares are down 1.98% to $120.78 on Thursday afternoon versus a 52-week price range of $101.81 to $384.29.
Read Next: Bill Miller On Why Warren Buffett Doesn't Understand Bitcoin
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