Investor Michael Burry has expressed concerns over Tesla Inc.’s valuations, citing the company’s decelerating sales momentum. Burry stated that Tesla is “ridiculously overvalued” after the company shared consensus estimates of its fourth-quarter vehicle sales, which came in below investor expectations.
Tesla’s Sales Projections
The company’s compiled estimates from prominent sell-side analysts indicate a broad consensus of 422,850 units for the current quarter. This represents a 14.93% decrease from the prior quarter and a 15% drop compared to the same period last year. As a result, Tesla is headed for its second consecutive drop in annual vehicle sales, with average estimates at 1,640,752 units, down 8.8% from the previous year.
Valuation Concerns
Despite the declining sales, Tesla remains the most valuable automaker in the world, with a market capitalization of $1.53 trillion. The company’s stock is trading at 204 times forward earnings, significantly higher than the industry’s average price-to-earnings ratio of 17.47. Burry, who rose to fame for betting against the housing market ahead of the 2008 financial crisis, has been a vocal critic of Tesla’s valuation in recent weeks.
Criticisms of Elon Musk’s Pay Package
Burry has also criticized CEO Elon Musk’s trillion-dollar pay package, warning that it would lead to stock dilution. He noted that the company dilutes its shareholders by 3.6% annually without any corresponding stock buybacks. Burry stated, “As an aside, the Elon cult was all-in on electric cars until competition showed up, then all-in on autonomous driving until competition showed up, and now is all-in on robots — until competition shows up.”
Reactions from Other Analysts
Fund manager and prominent Tesla analyst Gary Black said it was “very unusual” for Tesla to issue a press release with quarterly sell-side consensus estimates. Black expects the company’s fourth-quarter deliveries to be in the “420K range” rather than the “445K range.” Tesla shares were down 1.17% on Tuesday, closing at $454.24, and are down 0.35% overnight.
Conclusion
Michael Burry’s comments have sparked a debate about Tesla’s valuation and the company’s future prospects. With declining sales and a high price-to-earnings ratio, some investors may be reevaluating their positions in the stock. However, others remain bullish on the company’s potential, citing its innovative products and strong brand loyalty. As the automotive industry continues to evolve, Tesla’s valuation will likely remain a topic of discussion among investors and analysts.