Despite nearly a 50% drop since mid-December, Tesla Inc. (NASDAQ:TSLA) shares are still too expensive to attract seasoned investor Ross Gerber back into the fold.
What Happened: Ross Gerber, the president and CEO of Gerber Kawasaki Wealth & Investment Management, in an interview with Business Insider, stated that he doesn’t see a clear path for Tesla’s stock to rebound this year, even after the significant losses.
The long-term Tesla investor maintains that Tesla’s stock is still overpriced and believes that for the stock to rebound, Tesla’s earnings need to increase. On Wednesday, Tesla’s shares were trading at a forward price-to-earnings ratio of 65, more than three times the valuation multiple of the S&P 500. Gerber considers the stock to be overpriced at its current level, particularly as analysts have downgraded the company’s projected 2025 vehicle sales for the second consecutive year. “There’s this game that is happening now where the fundamental story has to be revalued,” stated Gerber.
The investor also criticized Musk’s controversial political actions, which he views as a lasting obstacle for the Tesla brand. Musk’s close association with President Donald Trump has reportedly led to a shift in the brand’s political alignment, with Tesla reportedly losing liberal support while gaining conservative buyers.
The spike in people selling their EVs due to Musk’s political stance has caused a sharp decline in the value of used Tesla cars. In a satirical post on X on Thursday, Ross Gerber also questioned, ‘If a liberal sells their tesla to a conservative. How many new Teslas are sold?’
Why It Matters: The recent decline in Tesla’s stock price and its overvaluation, as pointed out by Gerber, are significant in the context of Tesla’s shifting customer base and the political divide among its customers. Gerber had earlier predicted a 50% drop in Tesla’s stock this year due to CEO Elon Musk‘s shift in focus to other projects. This prediction has been largely accurate, with Tesla’s stock falling an additional 31% since his comments in late February.
Gerber also highlighted the challenges Tesla faces in the used car market. He likened it to the “Apple (NASDAQ:AAPL) problem,” where the product’s high quality reduces the incentive for customers to upgrade frequently.
Furthermore, a recent analyst note by JPMorgan Chase on Wednesday stated that the company lost too much brand value too quickly. It also warned that the EV maker could see the lowest quarterly deliveries since 2022.
Tesla holds a momentum rating of 89.66% and a growth rating of 55.23%, according to Benzinga’s Proprietary Edge Rankings. The Benzinga Growth metric evaluates a stock’s historical earnings and revenue expansion across multiple timeframes, prioritizing both long-term trends and recent performance. For an in-depth report on more stocks and insights into growth opportunities, sign up for Benzinga Edge.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
