Tesla (TSLA) Stock Could Be Overvalued, Warn Top Wall Street Analysts

UTC by Benjamin Godfrey · 4 min read
Tesla (TSLA) Stock Could Be Overvalued, Warn Top Wall Street Analysts
Photo: Depositphotos

Wall Street analysts have expressed their fears on the fast rise of Tesla (TSLA) stock but the company’s growth strategy may help sustain the growth.

The massive run of Tesla Inc (NASDAQ: TSLA) stock is beginning to confound Wall Street analysts who fear the shares have no framework to sustain its sporadic growth and may be really overvalued. TSLA was trading for just $211 a year ago and the stock price has recently added more than $500 to a record high of $1.794.99. Tesla’s scary volatility comes more as a surprise in the wake of the coronavirus pandemic that grounded the entire world.

Analysts bearish expressions on Tesla’s stocks may seem to be having a negative trend as the stock dropped 3.08% of its shares on Monday to close at $1,497.06. Although the stock opened the pre-market trading with a bullish run of 3.14%, it may fall as yesterday when TSLA soared as much as 16.5% before closing low. The electric auto maker’s wild shares hit $1,750 in its brief bullish run with a record market capitalization of $300 billion.

Reasons for the Recent TSLA Bull Run

As Coinspeaker reported the latest price rally in the Tesla stock comes with Elon Musk’s recent announcement of the Model Y crossover and its further price reduction. Furthermore, Elon Musk also announced that the Standard Range RWD will no longer be available. However, as its replacement, the company has announced a new 230 mile-range-variant. Musk added that the company will focus more on the long-range RWD version having a range of over 300 miles per charge.

The company’s landmark vehicle sales/deliveries in the COVID-19 pandemic laden second quarter has also suggested a positive company resilience to investors. With a record of 90,650 deliveries, investors believe that Tesla is on track to deliver as much as 750k vehicle units from 2021. These advanced expectations from the company top the reasons for a new clamor that the stock will be drawn into the S&P 500 index. These series of positive media outlook has contributed to the soaring nature of TSLA stock.

Experts Concerns about Overvalued Tesla Stock

Analysts believe that the overvalued stock of Tesla (TSLA) may have a reverse effect in cementing its profitability should it make it to the S&P 500. Larry McDonald, editor of The Bear Traps Report recently weighed in that “by buying up Tesla [stock] now, front-runners are forcing the S&P Indexes to give the stock a higher and higher weighting, Thus, ETFs / Indexes will be forced to pay up, buying even more shares. Then the hot money exits, leaving indexes holding the bag” which will result in an eventual fall in the stock price.

The fear of meeting with the expected demand, in the long run, is also of major concern. As in the case of Ely Lilly and Company (NYSE: LLY) stock which the motley fool writer George Budwell believed were overvalued based on its share price at the beginning of 2020 and may be unable to keep up the expectations. The predictions may seem correct as the pharmaceutical giant’s stock is currently down by 0.78% with a share price of $162.08.

The case of Tesla may turn out otherwise as the company is strategic in its approach to drive market growth. In addition to its Shanghai GigaFactory operating at its optimum from the Q2 records of 14,954 vehicle deliveries, with strategic partnerships with companies such as that with Glencore that will supply it with Cobalt and South Korean LG Chem for the batteries supply. The company’s stance on service delivery is also a catch for customers as Tesla’s stated philosophy is not to make a profit on service. It offers service at company-owned service centers and mobile technicians can also perform most inspections and repairs. In 2016, Tesla recommended having any of their cars inspected every 12,500 miles or once a year, whichever comes first. These perks are expected to help Tesla (TSLA) to sustain its meteoric stock price rise.

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Benjamin Godfrey

Benjamin Godfrey is a blockchain enthusiast and journalist who relishes writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desire to educate people about cryptocurrencies inspires his contributions to renowned blockchain media and sites.

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