The US stock market is higher today but there's one major exception: Tesla shares are down 2.6% in the second day of selling.
Shares sank 5% on Thursday after the company reported Q1 deliveries of 358K compared to 372K expected. There was a moderate rebound at the open today but that reversed despite a positive tape elsewhere.
Shares of the company remain extremely expensive by any traditional metric. They're trading at a 325x trailing multiple after earning $1.08 per share last year. On a forward consensus basis, they're trading at 170x, though the estimates might nudge down after Thursday's numbers.
The market cap of the company is $1.32 trillion on revenue of $94.8 billion so that's a trailing price-to-sales ratio of 13.9x and it's unlikely to improve meaningfully this year.
Essentially, the cult-like shareholders of Tesla are betting on Elon Musk to make a breakthrough in one or all of:
- Self-driving taxis
- Robots via Optimus
- Revolutionizing trucking
- A resurgence in demand for electric vehicles
It's a huge valuation for technologies that are unproven or a long ways away but the market believes (for now) that if anyone can do it, Musk can.
A looming problem for TSLA shareholders is the IPO of SpaceX. Musk's other company is the flavor of the moment and that's where his bets on space, artificial intelligence and social media are located. The company is reportedly targeting a valuation of $1.75-$2 trillion.
That's an incredible number of a money-losing company and with Starlink only posting about $10 billion in revenue last year.
For Tesla, the problem is that the retail cult of Musk could sell some TSLA shares in order to buy into shares of SpaceX. Essentially, the buying public could be divided and that could weigh directly on Tesla. Notably, Musk himself will have a controlling stake in SpaceX but doesn't in Tesla. That dynamic could lead him to focus more on his newer company.
In terms of technicals, shares of TSLA have erased the September rally now and are back to late-2021 levels. There is also a big potential double top on the chart. Given the lack of support from valuation, I don't see a floor anywhere close to here.
Meanwhile, JPMorgan out with a fresh note trimming their estimates after Q1 deliveries came in light. They note that it wasn't just the auto side as energy storage, which has been one of the bull case pillars, dropped 15% year-over-year at 8.8 GWh.
JPMorgan is keeping their Underweight with a $145 target, which implies roughly 60% downside to where we're trading now. Their core argument hasn't changed: the stock is pricing in earnings power that's years away and far from guaranteed.
We'll see if dip buyers step in, but JPMorgan is basically saying: don't be that person.
