In a report released on Thursday, August 26, Gordon Johnson of GLJ research reiterated his long-standing ‘Sell’ rating on Tesla (NASDAQ: TSLA), maintaining a low price target of just $24 set two months ago.
Johnson has long been a proponent of the view that Tesla is massively overvalued and losing the R&D race, particularly considering the recent success of Google’s (NASDAQ: GOOGL) subsidiary Waymo.
A longtime Tesla bear, Johnson has maintained a generally bearish outlook on the wider market for years — at press time, roughly 75% of his ratings are ‘Sell’ ratings.
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In stark contrast to general expectations that TSLA’s next earnings report, slated for October 16, will see at least 461,500 vehicles delivered and drive a bull run, Johnson is expecting a figure of 456,600 — which, it should be noted, would still represent a 2.9% increase quarter-over-quarter (QoQ).
Johnson’s estimate regarding deliveries was also hiked from a previous figure of 449,000 based on the latest China data, updates from six countries, and an analysis of U.S. vehicle counts.
Johnson says that Tesla is overvalued
The GLJ analyst has consistently represented the view that TSLA, currently trading at a forward PE (price-to-earnings ratio) of 82, is severely overvalued.
At the time of writing, the stock is priced at $257.55, having shed 0.52% over the last 24 hours. Tesla has gained 4.31% over the week, 25.20% over the last 30 days, and is up 3.69% year-to-date (YTD). If Johnson’s predictions were to come true, the stock would lose 90% of its current value.
Whereas other equity researchers, en masse, see the company avoiding such catastrophic corrections and reaching a market cap of $1 trillion in 2024, Johnson has often pointed to chief executive officer (CEO) Elon Musk’s tendency to overpromise and underdeliver.
Amidst a slew of issues too numerous to list here, the delay of the Robotaxi event, which promises to showcase fully functional self-driving technology and the substantial difference between what was touted as the Cybertruck’s price and what ended up being the actual price are two recent examples that come to mind.
While bearish sentiment regarding Tesla’s medium-term to long-term outlook is by no means rare, Johnson’s price targets are certainly outliers.
Johnson’s $24 Tesla stock price target defies consensus
In an X post, GLJ Research revealed the methodology behind the price target. It consists of taking the 5.6 average forward PE of peers — in this case, Ford (NYSE: F) and General Motors (NYSE: GM), applying a significant 269% premium, and applying that P/E figure to earnings per share estimates of 2025.
Still, this is a fringe opinion — Johnson routinely ignores several of TSLA’s unique advantages.
The company isn’t simply an automotive business, like legacy automakers such as Ford and GM — being both a tech leader and having a first-mover advantage affords significant potential for price appreciation that is sometimes hard to quantify, but should nevertheless not be ignored.
To further this point, TSLA also serves as an energy business, with products such as Powerwalls and Powerpacks, as well as additional income through its Supercharger network and regulatory credits.
The incentivization of electric vehicles worldwide, as well as Tesla’s efforts to expand productions at gigafactories should not be ignored either.
While bearish analyses should be taken into consideration, most price targets take these factors into consideration, leading to a much more conservative estimate of the downside.
