Tesla Inc shares TSLA,
declined more than 2% in premarket on Tuesday after Bernstein analyst Toni Sacconaghi lowered shares to perform below market performance, while maintaining a price target of $ 900. “Despite our relatively optimistic stance on electric vehicle evolution and the structural benefits we believe Tesla can have, we find it difficult to justify Tesla’s current rating, even under our most optimistic / imaginative scenarios, ”he wrote in a letter to customers. Saccaonaghi said he understood the bull case on Tesla, involving the company’s market leadership in an undervalued industry and Tesla’s potential for margin expansion, but he called the current valuation “mind-boggling” because “Tesla now even looks expensive versus technology for growth with large cap. ” He said the company’s corporate value is currently the same as that of Toyota Motor Corp. TM,
and Volkswagen AG VOW,
while those companies collectively make 20 million cars versus Tesla’s 500,000. “To be clear, we are not calling on investors to cut Tesla’s shares, which – given the recent price momentum – would likely equate to us recommending investors to step on a thriving freight train,” Saccaonaghi wrote. Instead, he ‘just notes that on a 12-month time horizon (and even more, a multi-year time horizon), it’s becoming increasingly difficult for us to imagine how Tesla’s stock can continue to outperform the S & P500, reflecting our broader skepticism about the sustainability of the outperformance of growth in the technology sector amid the current widening of valuation gaps that occur once every decade. “Tesla shares have so far gained 268% this year as the S&P 500 SPX,
increased by 0.3%.