Well, that was one way to avoid the Monday morning blues. The news that Tesla, Inc. (NASDAQ:TSLA) CEO Elon Musk had added some $1 billion in company shares to his portfolio jolted the market wide awake as the week commenced, and helped TSLA shoot up some 7.5% after the opening bell rang.
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While some of the luster had diminished by the time the market closed, TSLA was still up some 3.5% for the day. Coming on the heels of the gargantuan compensation package that the Board of Directors has proposed for Musk – which could be worth a $1 trillion if he leads the company to a number of benchmarks – the CEO’s decision to align more of his capital with the company’s future was seen as the ultimate show of confidence in Tesla’s prospects.
Though Tesla struggled during the first part of the year, the company has staged a strong comeback during the spring and summer months. Worries over declining vehicle sales and Musk’s political activities pressured the stock, as did concerns over tariffs and the removal of U.S. governmental purchasing incentives for EVs.
However, things have certainly been looking up lately. The company has no shortage of ambition, and is aiming to capture large portions of the lucrative self-driving market. And now that Musk is fully onboard (and even more invested), is now the time for everyday investors to follow suit?
Not according to top investor Jonathan Weber, who doesn’t think the recent Musk bump will compensate for other troubling matters.
“TSLA’s high valuation, falling margins, and headwinds in key markets make it a risky long-term investment compared to other Magnificent 7 stocks,” explains the 5-star investor, who is ranked among the top 1% of stock pros on TipRanks.
While Weber acknowledges the recent enthusiasm, he also seeks to put Musk’s stock purchase into perspective. A billion dollars is clearly a lot of money, though the CEO’s acquisition of 2.6 million new shares only marginally added to his previous ownership stake of more than 400 million.
“If an average investor owned $10,000 worth of Tesla and added another $70 to this position, that would be equal on a relative basis — that’s still a positive sign, but doesn’t scream bullishness,” adds Weber.
Moreover, the investor points out that Tesla’s market share and deliveries in Europe are sinking, which Weber chalks up to increased competition from European and Chineses firms and Musk’s unpopularity on the continent. In addition, previous hopes for tailwinds from India don’t seem to be forthcoming thus far, as the company only had 600 orders for the month of July. The removal of the U.S. tax credit doesn’t exactly help matters, either.
With an “excessive” earnings multiple hovering between 240x and 250x, Weber thinks the right move is to “sell this rally.” (To watch Jonathan Weber’s track record, click here)
Wall Street has mixed feelings about Tesla. With 14 Buys, 13 Holds, and 8 Sells, TSLA carries a consensus Hold (i.e. Neutral) rating. Its 12-month average price target of $313.17 implies losses of ~24% going forward. (See TSLA stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.