Is Tesla the “King of Meme Stocks”?

  • Danny Moses, one of the traders featured in The Big Short, called Tesla the “king of meme stocks.”
  • A small portion of Wall Street analysts are bearish on Tesla due to its stretched valuation multiples.
  • Tesla currently has the highest price-to-earnings ratio among the top 10 largest publicly traded companies in the world.

Figure 1: Is Tesla the “King of Meme Stocks”?

Bloomberg

(Read more from Wall Street Memes: What Happened With AMC Stock On The APEs Trading Debut)

Why Did Danny Moses Call TSLA “the King of Meme Stocks”?

Famed trader Danny Moses, who was featured in the book and film The Big Short, has called Tesla  (TSLA) – Get Tesla Inc. Report “the king of meme stocks” on his Twitter  (TWTR) – Get Twitter Inc. Report account.

Moses said that Tesla represents everything wrong with the current market. He pointed out that the company’s $800 billion valuation doesn’t match its fundamentals:

“If you think about it, $TSLA is the original #memestock; its stock price doesn’t match fundamentals & trades on a “story” that will never materialize; b/c regulators have let it go on for so long, it adds fuel to other #memestocks that anything is possible!”

The trader also pointed out that there are multiple government agencies, such as the U.S. Securities and Exchange Commission (SEC), investigating Tesla due to operational and non-operational issues.

Furthermore, according to Moses, there’s a group of Wall Street analysts who seem to sweep any Tesla-related problems under the rug.

Moses recently revealed that he has short positions in Tesla and compared trading “meme stocks” like TSLA to a chess match, in which Elon Musk is the king and Cathie Wood is the queen:

“If trading #memestocks was equated to playing chess, then all of the pawns are being taken and the knights/bishops, in the form of @ryancohen @CEOAdam, etc. are in retreat; it’s all about taking the Queen @CathieDWood and then checkmating the King @elonmusk to clean up this mkt”

Does TSLA Have a Meme Stock Valuation?

Besides Danny Moses, there are other analysts on Wall Street who agree that Tesla has a stretched valuation.

According to Citi analyst Itay Michaeli, Tesla’s current valuation is the main reason why he’s bearish on the stock.

He recently pointed out that several other companies that previously reached a market cap around $800 billion generated about $100 billion in gross profit.

By comparison, Tesla generated an estimated annualized gross profit of only $30 billion in the second half of its fiscal 2022.

JPMorgan analyst Ryan Brinkman is also cautious about Tesla’s valuation. He’s concerned that the company’s recent price increases could lead to a slowdown in the demand for Tesla vehicles.

He’s also bearish on Tesla because it has failed to expand its vehicle lineup for the third year in a row.

And although Bernstein’s Toni Sacconaghi has acknowledged that Tesla is an innovative company that has been financially successful in recent years, he struggles to justify its valuation.

The Bottom Line

Tesla’s valuation is clearly too high. The company has the highest price-to-earnings (P/E) ratio among the 10 largest companies in the world by market cap.

The mere fact that the company trades at a P/E multiple of almost 90 times — about 660% above the industry average — is enough to prove that this is a very expensive stock.

By comparison, Amazon  (AMZN) – Get Amazon.com Inc. Report, the company with the second-highest P/E in the top ten list, trades at a multiple of about 65 times.

Combined, the global market cap of automakers currently stands at $2.208 trillion. At this rate, based on Tesla’s operating results, the company would need to take over 50% of the global auto market to produce financial results that would justify its valuation.

The case that Tesla is a meme stock is bolstered by the fact that Elon Musk is the company’s CEO. According to a report by New Constructs, Tesla’s high share price indicates a “collective belief in Musk’s promises and protects Musk” from regulators that don’t want to be blamed for a share price crash. 

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)

Leave a Reply

Your email address will not be published. Required fields are marked *