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Tesla Inc. stock on Thursday broke its record-hitting streak, with one analyst calling it fully valued after its “meteoric” run-up.
Tesla TSLA, -2.10% shares fell as low as $480.37 on Thursday, off 2% amid gains for U.S. equities. The stock ended at a record $492.14 on Wednesday, the latest in a string of high-water marks going back to mid-December. Thursday’s losses were the first for the stock in 2020.
“In our view, (Tesla) shares now appear fully valued after a meteoric run-up since bottoming at $177/share last June and are not reflecting various near-term risks,” said Garrett Nelson, an analyst with CFRA.
Nelson lowered his rating on the stock to sell, from hold, citing the likelihood that Tesla’s new China plant would weigh on margins in the first half of the year and that U.S. sales could be hit by the phasing out of federal tax credits.
Moreover, Tesla’s planned factory in Germany, costing somewhere around $4 billion and $5 billion, could weigh on free cash flow in the coming quarters, Nelson said.
“We also see heightened risk of equity issuance, which would help de-risk the balance sheet but be dilutive to EPS,” he said. “With (Tesla’s) market cap now exceeding (General Motors Co. GM, +0.40% ) and (Ford Motor Co. F, -0.32% ) combined despite having only about 3% of joint vehicle sales volume, we think investors have given (Tesla) plenty of credit for future growth, raising execution risk,” he said.
Earlier this week, analysts at Argus Research and Credit Suisse raised their price targets on Tesla, although Credit Suisse kept a sell rating on the stock.
On Tuesday, Chief Executive Elon Musk made waves by pulling some meme-ready dance moves at an event at the Shanghai area factory showcasing the delivery of the first made-in-China Model 3 sedans.
Tesla’s stock rally has pushed the Silicon Valley car maker’s market cap to more than $86 billion, which is higher than Ford’s at its peak — just under $81 billion in 1999, or some $124 billion in today’s dollars.
Tesla has been the No. 1 U.S. auto maker in terms of market value off and on in the recent past, but it is the first time its market cap has topped Ford’s at its peak valuation. Ford is currently valued at around $36 billion, and GM at about $50 billion.
Tesla shares have gained 15% since the new year, and 42% in the past 12 months. That compares with gains of 1.4% and 1.6% for the S&P 500 index SPX, +0.50% and the Dow Jones Industrial Average DJIA, +0.62% this year, and of 27% and 21% in the last 12 months.
