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One of the leading coronavirus stocks used to be the one from Tesla Inc (NASDAQ: TSLA), however, the price rally seems to be running short of fuel in the last few days. It cannot be exactly substantiated as to why the shares are retracing, but several fundamentals can be pinpointed.
On Tuesday, TSLA shares were downgraded by Toni Sacconaghi an analyst at Bernstein, to ‘underperform’ from ‘market perform’, while maintaining a $900 price target.
“Despite our relatively bullish stance on electric vehicle evolution, and structural advantages we believe Tesla may hold, we find it difficult to justify Tesla’s current valuation even under our most bullish/imaginative scenarios,” Toni Sacconaghi wrote.
Tesla (TSLA) Stock Price
Tesla stocks have rallied 31.87% in the past month, which makes the 7.27% drop look like a normal bullish retracement. Yesterday, Tesla stock fell by 4.10% to close the day at $1476.49. As of the time of reporting, Tesla (TSLA) stock price is 1.55% up, at $1,499.42.
Incidentally, on Tuesday TSLA shares performed the poorest in its category. According to MarketWatch metrics, Ford Motor Company (NYSE: F) rose by 1.15% to $7.01, General Motors Company (NYSE: GM) rose by 2.45% to $26.33, and Nio Inc (NYSE: NIO)rose 4.96% to $12.27.
According to Sacconaghi, Tesla’s current valuation is mind-boggling. “Tesla now even looks expensive versus large cap growth tech,” he said
He continued to say that Tesla does not clearly possess the sustainability of the growth’s outperformance as observed. According to him, investors should take due diligence of the company depending on whether on long term or short term basis.
However, he added:
“To be clear, we are not calling on investors to short Tesla’s stock, which – given recent price momentum – would probably be equivalent to us recommending investors to step in front of a barreling freight train.”
He went on further to tell his investors that, “merely noting that on a 12 month time horizon (and even more so, a multi-year time horizon), it has become increasingly difficult for us to imagine how Tesla’s stock can continue to outperform the S&P500, mirroring our broader skepticism about the sustainability of the growth’s outperformance in the tech sector amid the current once-in-a-decade widening of valuation spreads.”
More Bullets to Spare for TSLA Rally
Under Elon Musk‘s leadership, the company has seen tremendous growth to be highly valued in a short span. The company is continuing to find avenues to keep its revenue high despite the coronavirus challenges.
Through his official twitter page, Musk announced that the company will supply batteries to other carmakers. “Tesla is open to licensing software and supplying powertrains & batteries. We’re just trying to accelerate sustainable energy, not crush competitors!” Musk said.
This and other positive fundamentals are likely to keep the Tesla rally on top in the near future.
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