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Investors rejecting Tesla’s stock despite record deliveries, says private equity CEO

Investors rejecting Tesla's stock despite record deliveries, says private equity CEO

Electric vehicle manufacturer Tesla (NASDAQ: TSLA) has seen its stock trade in the red zone most of 2021, dropping 9% since the start of the year. 

For most investors, it was expected that the Q1 2021 results might boost the stock. However, the results did not offer the much-needed turning point for the stock as projected by analysts. 

Tesla (TSLA) stock price performance year-to-date. Data:

The company delivered a record 184,800 Model 3 and Model Y cars for the quarter, beating analyst expectations. The firm also delivered 2,020 older Model S sedans and Model X SUVs, with CEO Elon Musk stating the new version of the company’s Model S sedans will be delivered starting May 2021. 

The firm expects to scale deliveries by 50% this year, while the Berlin and Texa plants will start production in 2021. 

Analysts are skeptical over Tesla’s stock performance after the results. Initial expectations viewed the company’s entry into the crypto sector would spark a replica of the 2020 rally. 

Eric Schiffer, CEO of private equity Patriarch Organization believes investors are rejecting Tesla stock stating the performance has failed to catch up to its high valuation.

 “Tesla’s performance was OK, but it wasn’t an Elon Musk slam dunk…I don’t think people are into Tesla because of bitcoin. Investors are rejecting the stock short term,” said Schiffer. 

Although Tesla projects an increase in deliveries, the company is not immune to the global chip shortage. Furthermore, Tesla is also facing legal hurdles on various fronts. In Germany, the company was fined $14.5 million over failure to make public “notifications and take-back obligations on end-of-life battery products.” 

Elsewhere, the higher-than-expected sales of regulatory credits have also boosted Tesla’s revenue. Once other competitors begin to manufacture their electric vehicles fully, it poses a question of what will happen to Tesla’s profitability. 

Tesla’s increasing competition from China, EU

Research firm GLJ founder Gordon Johnson believes Tesla’s business model coupled with increasing competition from Europe and China spells doom for the company. According to Johnson: 

“Record deliveries, but they’re losing more money for more cars they deliver. So they’re selling more cars, but they’re cutting prices significantly to lose money. This is not a viable business model. They are losing share in Europe and China, and there are sales in the U.S were down. And to say that the long-term outlook is good, we just don’t understand that”

Tesla’s stock could also be down due to the several price corrections encountered by bitcoin in April. In February, the company revealed a $1.5 billion investment in bitcoin. During the results, the company revealed that its bitcoin fortunes stand at $2.5 billion. If bitcoin moves towards another all-time high, it might have an impact on Tesla’s share price. 

Watch the video: Tesla’s earnings show a ‘definitional growth story’

Gene Munster, co-founder and managing partner at Loup Ventures, and Gordon Johnson, founder and CEO at GLJ Research, joined “Squawk Box” to debate the state of the company’s fundamentals.

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