(Bloomberg) – The recovery that made Tesla Inc. bigger than Toyota and Volkswagen is better suited to a tech company than an automaker, and buying the shares now is likely a mistake for anyone other than daily traders said an analyst by cutting his rating on theShare.
Valuation risks include the possibility that new Tesla models cannibalize sales of older ones, and growing competition in the overall electric vehicle market, wrote Sanford C. Bernstein analyst Toni Sacconaghi. While Elon Musk’s company has recently executed its strategy well, the 481% gain in shares in the past year probably reflects more good news than is yet to come, he said in a note to clients.
“Let’s be clear: this is a valuation call,” Sacconaghi wrote, calling the market value “mind-blowing.” It lowered its rating to the equivalent of a sale from a hold and maintained its target price of $ 900, representing a 42% discount as of Monday’s close. The shares fell as much as 4% to $ 1,477.60 on Tuesday.
Sacconaghi’s downgrade follows an advance that boosted the company’s valuation by more than $ 300 billion at one point amid investor optimism about strong second-quarter results, possible inclusion in the S&P index. 500 and the anticipation of new battery technology.
However, the analyst pointed out that trying to predict the direction of Tesla’s actions in the short term could be a “fool’s game”.
“Expectations seem achievable / achievable, the next Battery Day could be remarkable, and there is a strong price boost both in Tesla and among overall growth stocks,” said the analyst.
Sacconaghi said he would change his mind if Tesla finally demonstrates unique progress in autonomous driving or other software, leading to high margins over time.
The current valuation has led some investors to start valuing Tesla as if it were a technology stock. Sacconaghi noted that its market value is now larger than Toyota and Volkswagen combined. The two collectively make 20 million cars each year, compared to the 500,000 cars Tesla expects for this year.
Separately, Tesla said in a regulatory filing early Tuesday that it has cleared its deferred revenue balance related to sales of regulatory credits to other automakers. Without the sale of credits to non-compliant automakers, Tesla would not have made a profit last quarter.
Chief Financial Officer Zachary Kirkhorn said last week that while Tesla expects regulatory loan revenues to double approximately this year, it assumes that those sales will not make a significant contribution to the business in the future. Deferred revenue reached zero as of June 30, of $ 140 million at the end of the first quarter.
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