Tesla Still Overvalued, But Not as Much as the S&P 500

·3-min read

Tesla’s TSLA stock continues to slide, even after an event that talked up technological advancements that could allow a 56% reduction in cost, a 69% reduction in gigafactory investments and a 54% increase in range within the next three years.

Not only that – the company now expects to meet its previous guidance for a 36% increase in vehicle deliveries this year. That’s a big positive considering that management had doubts about achieving the target in July and also because most other automakers (traditional ones) aren’t expecting to grow at all.

“In about three years from now, we are confident we can make a compelling $25,000 electric vehicle that is also fully autonomous,” said Tesla CEO Elon Musk.

The long-term target is 20 million cars a year. We’re currently at 500,000, so it’s safe to say that this is still rather a long way off. But it’s close enough for the company to double down on battery production by taking some of the work in-house.

You’d think that investors would be happy with these developments. But no, they’re still selling. Maybe they’re just used to more (the stock is up more than 354% this year, even including the bashing over the last few days).

Or maybe they thought there was some magic up Musk’s sleeves that would miraculously drive up the next quarter’s earnings. Or maybe the current year’s.

Real technological development doesn’t happen overnight. And when the leading innovator just announced stuff that can only consolidate its leadership, this is something to take notice of.

So I like Tesla’s slide. I think it creates another opportunity to dive into the shares of this really innovative company with years and years of growth ahead of it that will be spurred on by environmental concerns, stringent regulations and the EV attaining cost parity with gasoline vehicles.

Have Tesla shares bottomed? Perhaps not. But at 12.12X sales, they aren’t that expensive any more. Especially since there’s the promise of 35.0% growth over the next 3-5 years (not adjusted for the latest announcements).

Plus, the S&P 500 on the other hand, is trading at its annual high of 4.53X while Tesla is 23.4% off.

I just don’t see the sense in selling Tesla shares. Hold them, buy them, but selling seems plain irrational.

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