Tesla Motors Inc (NASDAQ:TSLA) stock was called “high right now” by former General Motors Company (NYSE:GM) Chairman Bob Lutz as the stock might experience an extended bout of selling.
“Elon Musk is right. It’s grossly overvalued right now. When you look at it, their total production to date is still less than one day’s production of General Motors or Ford, so it’s filled with a lot of hype,” Lutz said in a CNBC interview. On September 5, Musk had said that on a short term basis Tesla’s stock price “kind of high right now.”
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Tesla’s potential as an innovator in the electric battery space
What Lutz fails to analyze is Tesla’s potential not only to be a car manufacturer, but also an innovator in the electric battery space, which long term professionals note as a significant upside call.
The move lower in Tesla could be short term and is not unexpected.
Previous ValueWalk analysis indicated the stock of Tesla could move down near the $200 range, and hit a potential bout of algorithmic selling with a sustained push into the $240 level on strong volume. The stock is currently testing support and if continued selling hits the stock it could see the $220 level rather quickly.
Various professional traders are looking for opportunity to buy the stock near the $200 level, but how low the stock goes remains a question.
Goldman’s concerns for Tesla
As previously reported in ValueWalk, Goldman Sachs has a target of $210. A fundamental concern Goldman raised in their report was the need for an additional $6 billion of capital, which was cited at the “low end of our three disruptive scenarios for Tesla Motors Inc (NASDAQ:TSLA).
While Tesla management has noted that the company could self-fund these amounts, it would consider external funding depending on its growth cadence and other projects it takes on.
Tesla’s recently announced gigafactory in Nevada is planning to occur in stages and the result of proper implementation could be a 30 percent drop in battery cost. Tesla did not detail how the cost savings would be achieved, only noting the cost savings would occur on both the cell and pack side and were driven by redesign, increased scale and increased localization of components over time.
When investing in Tesla Motors Inc (NASDAQ:TSLA), it is improvements in battery technology that really get the engines of long term investors going.