Stocktake: Analysts still cautious on Tesla

With the stock now having lost third of its value, has valuation sanity been restored?

If the US bull market resumes, momentum traders will likely seek to ride Tesla higher once again – irrespective of any valuation concerns. Photograph: Hannelore Foerster/Bloomberg News

If the US bull market resumes, momentum traders will likely seek to ride Tesla higher once again – irrespective of any valuation concerns. Photograph: Hannelore Foerster/Bloomberg News

 

Stocktake has often queried the logic behind Tesla’s crazed stock price ascent in 2020. With the stock now having lost a third of its value, has valuation sanity been restored?

Not according to GLJ Research, which predicts Tesla shares will lose over 95 per cent of their value over the coming year. An extreme forecast? Yes, although many analysts are cautious, with the consensus price target still well below current levels.

Too high

Indeed, the stock price remains more than twice as high as it was on May 1st, when Tesla CEO Elon Musk admitted it was “too high”. Saying Tesla remains overvalued doesn’t mean it will keep falling, however.

Valuation is a good long-term indicator but a hopeless short-term one. If the US bull market resumes, momentum traders will likely seek to ride Tesla higher once again – irrespective of any valuation concerns.

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