Skip to content

Tesla’s Stock Valuation Deemed ‘Egregiously Overvalued’ By Analyst

Competition, weak demand, and concerns over charging network raise doubts about Tesla's growth prospects.

Tesla, Inc. (NASDAQ:TSLA) has polarized the investment community and analysts, especially due to the recent surge in the stock price. An analyst at Roth Capital Partners believes the stock is “egregiously overvalued.”

A Tesla drives along a section of the Upper Great Highway where sand encroaches on the road from Ocean Beach on June 26, 2023, in San Francisco, California. A recent U.S. Geological Survey study concludes that “by 2100, the model estimates that 25-70 percent of California’s beaches may become completely eroded due to sea level rise scenarios of .5 to 3.0 meters , respectively.” (Loren Elliott/Getty Images) 

Analyst Craig Irwin, in an interview with Yahoo Finance last week, stated that after hitting a low point at the end of last year, Tesla stock has performed remarkably well this year. He attributes the stock rally to the sell side’s excitement about the company’s price cuts and the widespread adoption of its North American Charging Standard (NACS) by leading OEMs.

“So they’ve had some real wins and the valuation has taken off like a kite,” the analyst said, calling the move from $100 to over $250 a “reactionary move.”

While he acknowledged Tesla as a great company that has played a significant role in transforming transportation, he points out the increasing competition from traditional automakers like Ford Motor Co. (NYSE:F) and General Motors Corp. (NYSE:GM). With numerous electric vehicles entering the market, Tesla may face challenges in maintaining its growth and margins.

The analyst also highlighted a weak demand environment, noting that Tesla had to aggressively cut prices to stimulate demand. 

Tesla had slashed prices for its vehicles that generated sales in the first quarter of 2023 as well as the second quarter.

The Model 3 and the Model Y remain as the company’s best-selling vehicles as the Model 3 is the best selling electric vehicle in California.

Tesla’s incoming Cybertruck is expected to enter production in 2024 where it will compete with Ford’s F-150 Lightning and GM’s Chevrolet Silverado EV.

Irwin credited Tesla for its dominance in the NACS market, mainly due to its Supercharging network. However, he mentioned potential concerns about Tesla users having to wait behind other vehicle brands to charge, which may impact the Tesla brand but still result in profits.

“But I look at Tesla, I’d say it’s egregiously overvalued. But man, what a fantastic pioneer to drive this industry forward,” Irwin said. 

Tesla is definitely not a value trap, but it may be a bull trap, Irwin said.

“A lot of investors trade as momentum investors and are in this stock and correctly selling into strength in my opinion, you know, and then buying on weakness,” he said. 

Irwin says investors are concerned about the battery source for the rear-wheel drive Model 3 car, Tesla’s highest-volume car, coming from China and also the competition.

“And as this evidence comes out, you can expect some significant volatility in the stock. And we’re cautious,” the analyst said.

“We think people should be aware that that’s a significant possibility over the next number of months.”


Produced in association with Benzinga

Edited by Alberto Arellano and Joseph Hammond

“What’s the latest with Florida Man?”

Get news, handpicked just for you, in your box.

Check out our free email newsletters

Recommended from our partners