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Tesla takes a severe beating.
NEW YORK / OSLO (Nettavisen): Tesla’s stock is up 400 percent so far this year, but hit the wall on Tuesday, where the stock collapses 15 percent on the stock market.
The big drop comes after several stock experts warned of the electric car company’s sharp rise.
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Blood red on Wall Street
It’s blood red on Wall Street and shortly after the stock market opened on Tuesday, the Dow Jones is down 560 points, or two percent.
The S&P 500 Index was also down two percent, while the Nasdaq was down 300 points and 2.6 percent.
– Tesla shares are the most dangerous on Wall Street.
As recently as Monday, a stock analysis expert took the magazine by mouth about Tesla stocks.
David Trainer, chief executive of New Constructs, which makes stock market analysis software, believes that Tesla stocks are the most dangerous on Wall Street.
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Trainer believes that the basic financial preconditions of the company are far from justifying such a high price and valuation. He illustrates it as follows:
Imagine the best case scenario, like Tesla producing 30 million cars over the next ten years, entering the insurance industry, and making margins as high as Toyota, by far the most efficient automaker in the world. If all of this turns out to be true, the stock price will remain too high relative to the company’s profitability, Trainer says on CNBC’s “Trading Nation.”
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Based on the average sale price, Trainer estimates that the share price assumes a market share of between 40 and 110 percent (which is not possible ..). With a current average price of $ 57,000 and estimated sales of 10.9 million cars by 2030, a market share of 42 percent is assumed. It’s unrealistic, estimates the chief analyst.
– Perhaps the greatest house of cards of all time
Tesla stock is now trading at 159 times profit. In 2019, the company sold 367,500 cars. Trainer says the stock is one of the greatest, if not the greatest, house of cards in financial history, and suggests that it is a matter of time before it collapses.
One reason is a recent stock split, which Trainer says is just a build to lure more naive investors into buying the stock.
– Stock splits have no effect on value. They don’t change the size of the company, they just divide it into smaller parts.
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After Tesla divided the stock into five on Aug. 31, the share’s value rose 12 percent, but fell again five percent a week later, when the largest individual shareholder outside the company, Ballie Gifford, it sold. Additionally, a more widespread sale affected some of the top-rated companies.
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– Worth a tenth
Trainer claims that a realistic valuation would be about one-tenth of the stock’s current value.
– Tesla does not reach the top ten in sales of electric cars in Europe, and this is due to a change in the law that has been a strong initiative for automakers to produce hybrids and electric cars. A similar law change is happening in the United States, and I think $ 50 is a more realistic share price than $ 500, he says.
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