That's one way for an analyst to keep their name in print pixels.
If the reader is nervous (and interested) we did have some encouraging thoughts in our second post on Tesla's earnings report, yesterday's "Tesla stock sinks as Wall Street searches for 'gross margin' floor" (TSLA): "Unplanned Freefall? Some Survival Tips"
And today, from Fortune via Yahoo Finance:
After the bell on April 19, Tesla announced Q1 results that sorely disappointed even its ardent Wall Street fans. Five price reductions so far this year, designed to bolster demand, lowered average sales prices so markedly that operating margins fell from over 19% a year ago to 11.4%. All told, earnings cratered by almost one-fourth. The battery-on-the-blink performance was far from the fabulous growth story that Elon Musk’s long been selling investors. On the news, no fewer than seven analysts pared their price targets for the shares. At midday on April 20, Tesla’s stock had fallen 9.3% to $164.40, erasing $58 billion in market cap, an amount equal to more than one-third the valuation of Netflix.
But for one leading analyst, the selloff isn’t remotely big enough to bring the EV king’s shares in line with its fundamentals. David Trainer, founder and CEO of investment research firm New Constructs, believes that using the most realistic projections for the likes of sales and earnings, Tesla’s worth something like $28 a share or one-sixth its current price—which by the way, is down 60% from its peak of $415 reached in late 2021. “Tesla remains hugely overvalued,” Trainer told Fortune, pointing to a $517 market cap that still amounts to twice the combined valuations of Toyota and Volkswagen.
Trainer is unswayed by the narrative that Tesla’s not mainly a car company but a tech juggernaut that will set the pace in self-driving vehicles and produce the next-gen batteries its rivals will rely on. Put simply, he believes that the flood of new, mostly bargain-priced models issued by every big competitor will substantially lower Tesla’s profitability going forward. For Trainer, it’s all about the numbers. First, what Tesla’s future earning must equal to justify its current cap, and second, assessing its true value based on reasonable projections for sales and profits. In a new report, Trainer gives his estimates showing that Tesla flunks on both criteria.
How fast must Tesla grow to be worth a cap of over $500 billion?
For both exercises, Trainer uses one of the most reliable tools in finance, discounted cash flow analysis. To see what Tesla must do to merit an over half-a-trillion valuation, he plugged in the sales, profit, and capex numbers over the next eight years that discount back to that gigantic benchmark. For Tesla to get there, Trainer reckons that it must grow sales at a 28% compound rate through 2031, and achieve after-tax operating margins of 13%, 80% higher than Toyota’s current level of 7%. Tesla also needs to keep capex growth at one-third of its current rate, despite the requirement of constantly building new factories to sustain that exploding output.
If it hits those supercharged metrics, Tesla would garner $100 billion in net operating profit by 2031, 60% more than Toyota, Stellantis, GM, and Ford all make combined, ascending to what Apple has earned in the past four quarters. Trainer’s verdict: It’s mission impossible. It won’t happen....
....MUCH MORE
For what it's worth (ahem) after falling $17.60 yesterday the stock is up a bit, $0.67 (+0.41%) at $163.66.
Our previous visits with New Constructs were remarkably profitable but I don't think $28 TSLA is in the cards short of a 50% whack in the S&P 500:
April 2021: Coinbase: Research Shop New Constructs Says $100 Billion Valuation Should Be 80% Lower
May 2021: "Coinbase: ‘This business will be commoditized,’ New Constructs CEO argues" (COIN)
This fellow is a tad bearish on Coinbase...
Coinbase Misses Across The Board, Stock Gets Whacked (COIN)
I had to double-check that I remembered the symbol when I saw a price in double digits.
During the regular session the stock was down 12.60% at $72.99 and after the earnings news is off another $8.64 (-11.84%) at $64.35 - after touching $58.12.
On the flotation of the stock (direct listing, reference price $250) it traded as high as $429.54 before closing at $328.28. There were a string of closes around $338 -368 early last November but basically this stock has been a disaster for the longs:
