By Elishya Perera
(CWBN)_ Tesla’s billionaire cofounder and CEO Elon Musk was pushed back to the number three spot on Forbes’ ranking of the world’s richest people on Wednesday (Dec 9), as Tesla stocks plunged after JPMorgan warned investors that the electric carmaker’s shares are overvalued.
Last Tuesday, Musk briefly overtook LVMH chairman Bernard Arnault to become the world’s second richest person, after Tesla stock rose following the $5 billion capital raise.
However, in a new report, giving a bearish outlook on Tesla, JPMorgan analyst Ryan Brinkman said Tesla shares are “not only overvalued, but dramatically so”. Brinkman therefore warned investors to not add Tesla stock to their portfolios until it is added to the S&P 500 Index on December 21.
This warning saw shares of Tesla tumble by nearly 7 per cent, lowering Musk’s net worth by $8.9 billion in one day, which was sufficient to push him back to his previous spot on the Billionaires’ ranking.
Brinkman’s price target on Tesla, which rose from $80 to $90 following the capital raise, remains one of the lowest price targets on Wall Street. It is also more than 80 per cent below the current stock price of $604 per share.
While acknowledging that Tesla shares have risen more than 800 per cent since December 2018, however, Brinkman pointed out that consensus expectations for Tesla’s earnings through 2024 have dropped.
Accordingly, the analysts at the multinational investment bank concluded that the electric carmaker’s multiple of earnings are extremely high in nominal terms “for any company in any industry at any time”.
While Tesla’s stock has been dramatically surging ever since the news broke that the company will be added to the S&P 500 Index on December 21, however, analysts are evenly split on their opinions, as 36 per cent give it a “buy” rating, 31 per cent recommend it as a “hold” and 33 per cent give it a “sell” rating, according to Bloomberg data.
