GM’s Lutz Calls Tesla Motors Inc “Filled With Hype,” As Stock Tests Support Near $242

Tesla stockBlomst / Pixabay

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.”

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.

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About the Author

Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com

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