Tesla Skeptic With Downgrader’s Remorse Digs In Over Valuation
An analyst who picked an inopportune time to downgrade Tesla Inc. is expressing regret, giving Elon Musk credit, and yet still doubting the electric-car maker deserves such a rich valuation.
“I wish I hadn’t done it,” Joe Osha, an analyst at JMP Securities, said of his decision tocut Tesla to the equivalent of a hold from a buy on Oct. 3.
The move looked shrewd at first — the shares slumped 4.2% that day, after Tesla reported quarterly deliveries that fell short of a number the chief executive officerhyped the week before. But later in October, the billionaireshocked Wall Street with a profit, plus progress toward buildinga plant in China and bringing out his next electric vehicle, the Model Y.Tesla’s stock has more than doubled, closing Tuesday at a record $537.92.
“As an analyst, whenever you end up in this not-very-good situation where you’ve missed a big move in a stock, there’s always a temptation to just give in,” Osha told Bloomberg Television. But he’s reluctant to recommend the shares now. “I don’t think that I’m doing my job if I tell people to buy a stock at 20 times Ebitda,” he said.
As of Tuesday’s close, Tesla’s enterprise value is 27.3 times greater than the earnings before interest, tax, depreciation and amortization that analysts expect the company to average in the next two years, according to data compiled by Bloomberg.General Motors Co. trades at a multiple of 2.6, andFord Motor Co.’s is 2.3.
Tesla’s valuation is rich even relative to technology stocks:Amazon.com Inc. trades at an 18.6 multiple, andApple Inc.’s is 15.4.
While Osha cautioned against buying Tesla now, he gave Musk props for the company’s dominance of the burgeoning market for battery-powered cars, calling the stock “reallythe only way to play electric vehicles right now.” He left CES — the event formerly known as the Consumer Electronics Show — last week unimpressed with the offerings that established automakers put on display.
“It’s a little shocking, here at the beginning of 2020, that the major auto OEMs in the U.S. and Europe still don’t have a product to compete with Tesla,” he said, referring to original equipment manufacturers. “Tesla’s competitive positioning is awesome.”
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