Tesla: A Bull Run or Bull Trap? Analyst Warns Stock May be ‘Egregiously Overvalued’
Tesla stock has experienced a significant rally this year, but one analyst is cautioning investors that the high valuation may not be sustainable. In an interview with Yahoo Finance, analyst Craig Irwin noted that while Tesla is a pioneering company that has transformed the transportation industry, it is facing increasing competition from traditional automakers like Ford and General Motors.
Irwin attributed Tesla’s recent rally to the sell side’s excitement about the company’s price cuts and the widespread adoption of its North American Charging Standard (NACS) by leading original equipment manufacturers (OEMs). However, he expressed concerns about the weakening demand environment and the need for Tesla to aggressively cut prices to stimulate sales.
The analyst also highlighted the dominance of Tesla’s Supercharging network in the NACS market but mentioned potential challenges arising from Tesla users having to wait behind other vehicle brands to charge. While this may impact the Tesla brand, it could still result in profits.
Irwin described Tesla as egregiously overvalued, cautioning investors that they may be caught in a bull trap. He noted that many investors are trading as momentum investors, selling into the strength of the stock and buying on weakness. Irwin believes that as evidence emerges regarding the source of the battery for Tesla’s highest-volume car, the rear-wheel drive Model 3, coming from China, investors can expect significant volatility in the stock.
Tesla’s stock closed at $279.82 on Monday, marking a 6.90% increase for the day. However, Irwin urges caution and suggests that investors should be aware of the potential for significant volatility in the coming months.
In conclusion, while Tesla is acknowledged as a great company that has driven industry transformation, Irwin warns that the stock may be overvalued. With increasing competition, concerns about weak demand, and potential issues related to the battery source for Tesla’s cars, investors are advised to tread cautiously. The analyst advises being aware of the possibility of significant volatility in the stock in the near future.
