Tesla (Tesla Stock Quote, Chart NASDAQ:TSLA) shares have been slammed this month, continuing a long slide that has investors feeling shaky about the stock’s prospects. It’s all part of the market waking up from a bad dream, says Norman Levine of Portfolio Management Corp, who says rising competition in the luxury auto sector might eventually spell the end for Tesla.
Tesla a short?
“I don’t normally short stocks but if I was shorting stocks, this would be one of them,” says Levine, managing director at Portfolio Management, to BNN Bloomberg on Wednesday. “Even from where it is now, this company is so overvalued, it’s unbelievable to me. It’s traded at a multiple that’s many, many times what other auto stocks trade at.”
Once a tech sector favourite, Tesla rode a wave of investment in 2017 which brought the stock above $350.00, as investors put their faith in CEO Elon Musk’s charting of a new path in the car market. Fast forward two years and ongoing production and profitability woes coupled with Musk’s own erratic behaviour have put a dent in the CEO’s halo and in the company’s long-term prospects.
Last month, the company rolled out its first quarter results, which badly missed analysts’ estimates for both revenue ($4.54 billion versus the expected $5.19 billion) and earnings (a $2.90 per share loss versus the expected loss of $0.69 per share). Those numbers caused Tesla’s share price to speed up its descent, where the stock now sits down 42 per cent year-to-date. (All figures in US dollars.)
Levine says that hero worship of Musk has been a factor in the stock’s rise and fall.
Elon Musk is “brilliant but crazy”…
“There are a lot of negatives out there. First of all, he’s crazy. He’s brilliant but he’s crazy,” Levine says. “Tesla is in the upper end of the auto sector, the luxury area, and now you’ve got the BMWs, the Mercedes’, the Audis and they’re slowly coming out with their electronic vehicles. [Musk] hasn’t had any competition in the area up until now, and now he’s got competition.”
“Their financial picture is pretty poor, their bonds are trading at about 85 cents on the dollar, which is a precursor to where the stock is probably going to be headed,” he says.
“Long term, this could be a company that may not survive if the other companies are as successful as I think they will be in competing against Tesla,” he says. “I wouldn’t go near the stock.”