Tesla Stock Takes 6% Post-Earnings Dive—Here’s Why Some Say Its $860 Billion Valuation Is ‘Disconnected From Reality’ - Forbes

Topline

Tesla stock slid Thursday after the electric vehicle company delivered an earnings report that largely exceeded headline expectations, as pessimistic warnings grow louder about whether the company’s recent 150% stock surge was warranted.

Key Facts

Tesla’s $24.9 billion in sales and $0.91 earnings per share for the second quarter beat consensus forecasts, but its Wednesday afternoon report demonstrated why its stock is “egregiously overvalued” at its $273 ticker, Roth analyst Craig Irwin told Yahoo Finance, sharing his $85 price target for the company.

Shares of Tesla slipped more than 6% in early Thursday trading, set for its worst day in three months.

Tesla reported its lowest operating income since 2021 as vehicle profit margins slumped to a multiyear low of 18.1%, amplifying concerns about its ability to continue on its path of astronomical financial growth.

Tesla’s price-to-earnings ratio (P/E ratio), which tracks a company’s stock price compared to prior earnings and indicates how confident investors are about a company’s growth prospects, has exploded by more than 130% this year as the market largely cheers on boosted sentiments for tech stocks amid the artificial intelligence wave and a flurry of positive headlines for Tesla, including the adoption of its charging technology by many of its EV competitors.

But neither AI nor charging expansion are “financially material for Tesla,” according to Bernstein analyst Toni Sacconaghi, whose $150 price target for Tesla is among the lowest among analysts at major firms.

Crucial Quote

In a note to clients, David Trainer, CEO of boutique equity research firm New Constructs, declared that Tesla’s “fundamentals are completely disconnected from reality” and suggest a company whose stock should be worth as little as $26 (a price that would be Tesla’s lowest since March 2020) and value it at just $82 billion.

Chief Critic

Wedbush’s Dan Ives, a longtime Tesla bull, raised his price target for Tesla from $300 to $350 on Thursday, citing fresh optimism about CEO Elon Musk’s “golden vision” for the company including AI and charging revenue.

Forbes Valuation

Musk’s net worth fell by $11 billion as Tesla shares slumped Thursday. Musk remains by far the richest man in the world, according to our estimates, as his $246 billion fortune is $11 billion larger than anybody else’s.

Tangent

Netflix, the other major company reporting earnings after Wednesday’s market close, also suffered a post-earnings stock hangover as its share price tanked more than 8% as investors similarly balked at its growth story after its stock price more than doubled in recent months.