Investors present the bull and bear case
Shares in Elon Musk’s Tesla have been on a tear this year — and whether or not it’s a buying opportunity continues to divide investors. Over the year to date, the stock of the auto giant, which designs and manufactures electric vehicles, battery energy storage devices, and solar panels, has surged around 100%. Shares also got a boost Monday, even after Tesla delivered far fewer cars than Wall Street expected in the third quarter. The U.S. EV giant said it delivered 435,059 vehicles in the third quarter , below the 440,000-460,000 that most analysts had penciled in. This comes as factory shutdowns hit production and demand for electric vehicles sagged in the face of higher interest rates. While the latest delivery numbers are up 27% year-on-year, it marks a decline of more than 31,000 vehicles from the second quarter. Tesla bear For David Trainer, founder and chief executive officer at investment firm New Constructs, Tesla is “one of the most overvalued stocks in the market.” He said the jump in its share price this year came amid a shift in market sentiment, as investors priced in a “softer landing scenario after a brutal past year of Federal Reserve rate hikes.” “The shift in market sentiment doesn’t change the fact that Tesla’s stock fundamentals are completely disconnected from reality. Tesla is a terribly overvalued stock that we think is worth closer to $26 per share instead of its current share price of around $280 per share,” Trainer said in notes sent to CNBC. TSLA YTD mountain Shares in Tesla have surged substantially in the past year Tesla bull However, Gene Munster, managing partner at Deepwater Asset Management, disagrees. On the latest delivery figures, he said it was important to note that Tesla “basically shut production down in China” as it retooled for the revamp of its Model 3. “So, when you factor that in, these numbers are actually respectable — up 17% year-on-year on the production side and 27% year-on-year on the delivery side,” he told CNBC’s ” Street Signs Asia ” on Monday. “I actually think this business is intact. I think this is just some noise in the numbers, and you have to step back and look at the bigger picture about what’s going on.” Tesla groups its deliveries into two categories, Model S and X vehicles, and Model 3 and Y vehicles. Tesla watchers are now eyeing the Model 3 revamp and launch of the company’s long-awaited electric pick-up , dubbed the Cybertruck. There has been “a lot of noise” around these, Munster said, particularly in terms of expected deliveries projected timelines, with the pick-up’s launch expected “a long time ago.” Nonetheless, he is expecting the Cybertruck to be Tesla’s “second-highest volume” vehicle, and said it hasn’t been priced into its shares. ‘Messy decade’ Looking ahead, Munster warned of a “messy decade for traditional auto.” However, even with issues such as ongoing labor negotiations in the U.S, and pressure around “getting the software right,” he said the “window is going to be open for Tesla for the next few years.” New Constructs’ Trainer feels otherwise. He highlighted the automaker’s multiple price cuts in 2023 , along with “lackluster” production levels in the first half of this year. “[These] raise questions about just how much demand there is for Tesla vehicles, especially amid competition from rivals Ford , General Motors and virtually every other automaker,” he said in notes to CNBC. “Tesla can no longer enjoy its first mover advantage as many other major automakers are producing electric vehicles. These competitors have more experience in auto production and more resources and cash flow than Tesla to invest in the electric vehicle market.” Correction: This story has been updated to correct the spelling of Tesla.
