PALO ALTO – In the past year, Tesla (NASDAQ:TSLA) has been the darling of investors as the stock has risen almost 500 percent and is currently trading near its all-time high. However, in recent weeks a number of analysts have begun to rethink their forecasts downward. Aswath Damodaran, a professor at NYU’s Stern School of Business who specializes in equity valuation, and Lazard Capital’s Aditya Sarghare among others have all come out to call the company overvalued.
Goldman Sachs (NYSE:GS) and Merrill Lynch (NYSE:BAC) have also expressed caution with Merril valuing Tesla’s stock at less than $ 40 the current share price. One industry report even ran a report entitled “Even Elon Musk Thinks Tesla Stock Is Overpriced.”
In an interview last month, Musk said ‘the market is being very generous. They are giving us a lot of credit for future execution. The valuation we have right now is more than we have any right to deserve. Our stock price is obviously too high based on historical financials or even current financials.’ For Musk, this was an uncharacteristic show of humility, and it is probably brought on by fear of investor lawsuits if the stock plunges.
The company has also continued to have its share of problems, including battery supply disruptions as pricing issues, which have added to the cost of the Model S. Another challenge is the limited amount of lithium available globally, and the success of the company, at least with the current battery configuration, could be their ultimate undoing.
Tesla prides itself on its ability to stay ahead of its competitors when it comes to technological innovation as other auto companies begin waking up to the challenge that Tesla represents. Ford (NYSE:F) is currently working on Hybrid Electric Vehicle Technologies (HEVT) for the popular F-150 pickup truck if successful this technology might propel Ford ahead of Tesla.
Furthermore, a number of auto industry analysts have become convinced that Tesla’s supply chain is not sustainable. Accordingly, the company will continue to battle technological hurdles in order to grow its business to the levels where they can take advantage of economies of scale.
While the electric vehicles, or hybrids, represent the future, Tesla is mostly likely a sell as the multiple is simply too high and institutional investors are starting to look for the exit. Shares in Tesla were down almost two percent on Wednesday in light trading.