Tesla’s share price has gone stratospheric as it breaks through $900 in pre-market trading. Since hitting a low of $176 in June, the share price has increased five-fold, which has given short sellers a torrid time.
Yet this valuation is impossible to justify, although there is every chance it will break $1,000. The cars are innovative, they look great and we can all agree that electric cars are the future, but the rest of the motoring sector is catching-up, or arguably has caught up. Furthermore, Elon Musk has a history of over promising.
Tesla looks and smells like a 2000 tech bubble. Just look at the stats. In 2019, the company sold 370,000 units, Ford sold 2.4 million; Tesla’s revenue in 2019 was $24 billion, Ford’s was $157 billion; and yet Tesla’s market cap today is approaching $150 billion and Ford’s is $36 billion.
There is a massive disconnect. Innovation should be baked into valuations, but not to this extreme. You need to be brave, but ultimately the shorts should hang in there, or perhaps now is the time to double down and turn on what could be a hugely over-inflated stock.