Ahead of earnings results to be announced after the closing bell, analyst Craig Irwin questioned the current valuation for Tesla (NASDAQ:TSLA), argues that Elon Musk’s electric car maker, which has fallen more than 50% in the past year, continues to sport “unreasonable” pricing.
Speaking to CNBC, an executive and senior research analyst at Roth Capital Partners argued that increased competition in the electric vehicle space, especially from established automakers, will put pressure on TSLA.
“Tesla is overvalued, it’s not sustainable in the long run. They don’t operate in a vacuum,” he argues.
Tesla (TSLA) accounted for the bulk of the U.S. electric vehicle market share in the late 2010s. However, after elevating the electric vehicle’s reputation, the company has seen a flurry of new competition over the years. Recently, both from electric vehicle-focused startups and traditional automakers are ramping up their own electric vehicle competition.
As a result, TSLA now faces competition from emerging companies such as Lucid Group (LCID), Rivia (RIVN) and Polestar Cars (PSNY), as well as increased EV production from big names like GM (GM), Ford (F) and Toyota (TM).
Irwin acknowledges that TSLA deserves a lot of credit for creating the modern EV market but says the company will struggle in the face of increasing competition. Therefore, he maintains a Hold rating on the stock with a price target of $85/share.
“We need to bring some rationality, some logic to pricing,” he said. “Toyota has a smaller market cap, and Tesla doesn’t have anything that Toyota doesn’t. In my view, that’s kind of irrational pricing.”
Looking at stock performance, TSLA lost about 55% The past 12 months, although it has benefited recently from a ~29% recovered so far in 2023. In Wednesday’s trading, the stock fell more than first% to drop below $142.
Meanwhile, Wall Street analysts generally remain positive on TSLA, with consensus review Buy, according to Seeking Alpha data. Meanwhile, Seeking Alpha’s Quant rating system has a more conservative view on stocks, rate it as Hold.
For more on Tesla, see why Seeking Alpha contributor BeanKounter Capital said, “Despite the sharp drop, the stock still looks pretty expensive, with a P/E of 32.7x.”
Also, read the report from SA contributor WideAlpha:”We chose Tesla over Toyota, although believe that Toyota’s valuation looks more attractive.”