Tesla's Path To Warren Buffett's Portfolio: How Much Should Stock Drop To Get Berkshire's Attention?

Tesla, Inc. (NASDAQ:TSLA) stock is going through a lackluster stage after a promising start to the year, as worries concerning demand and margin weigh down.

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The average analysts’ price target for the stock, according to data compiled by TipRanks, is $202.84, suggesting over 20% upside. Nevertheless, the stock may not have become cheap enough for accumulation by Warren Buffett.


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What Happened:  Buffett’s Berkshire Hathaway pursues value investing — a strategy that suggests buying stocks that are trading at far less price than the intrinsic book value.

Berkshire has so far avoided taking a stake in Tesla despite all the hype that surrounds it. Tesla CEO Elon Musk loses no opportunity to tell the investment guru to consider using Berkshire’s massive cash hoard for buying the EV maker’s stock.

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Recently, fund manager Gary Black said in a tweet that Buffett may not lap up Tesla stock. He premised his view on the argument that Apple, Inc. (NASDAQ:AAPL) and BYD Company Limited (OTC:BYDDY) (OTC:BYDDF) were trading at dirt-cheap valuations when Berkshire first took a stake in them.

Apple was trading at about 12 times the forward earnings per share estimate when Berkshire opened a position in it in 2016. BYD was at less than 15 times the forward P/E estimate in 2008 when Buffett first bought into the stock.

See Also: Everything You Need To Know About Tesla Stock

Why It’s Important: Tesla’s stock currently trading at 48.7 times the estimated earnings per share of $3.45 for 2023.

If Tesla were to have a forward P/E multiple of 12 times, the stock price should have to drop to $41.4. This marks a 75.4% plunge from current levels. Even the most bearish Tesla analyst has a price target higher than the level Buffett might be interested in.

GLJ Research’s Gordon Johnson currently has a $73 price target for Tesla stock. This is despite the analyst sounding out a doomsday prediction for Tesla, citing waning demand and competitive pressure in its key China market.

Such a drop is unlikely, given Tesla’s competitive moats and its privilege as the leader in the industry.

So, will a Buffett bet be a pipedream for Tesla or will the billionaire relax his strict investment strategy to accommodate the EV maker in his portfolio?  Only time will tell.

Tesla closed Friday’s session down 2.38% at $167.98, according to Benzinga Pro data.

Check out more of Benzinga’s Future Of Mobility coverage by following this link.

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This article Tesla’s Path To Warren Buffett’s Portfolio: How Much Should Stock Drop To Get Berkshire’s Attention? originally appeared on Benzinga.com.

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