Analyst: Tesla stock is far overvalued and could plunge more than 50%

Tesla stock downside as competition continues to heat up

According to GLJ Research analyst Gordan Johnson, Tesla stock has a downside as the competition gets tougher. In a recent interview with CNBC, the analyst stated that Tesla’s valuation seemingly benefited from the mystique surrounding the company. Also, the CEO Elon Musk at the expense of fundamentals tells a different story.

Analyst: Tesla stock is far overvalued and could plunge more than 50%
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“I know people love Tesla, but I think there’s significantly more downside as people realize this is just an auto company: 95% of revenue from selling cars, 5% from an energy division that loses money,” Johnson said. Musk has routinely pinned the blame for the steep fall in Tesla stock on the Federal Reserve and steep interest rate increases this year. But he is facing criticism from shareholders for neglecting the electric car maker in order to focus on his recent acquisition of Twitter.

Competition in the electric vehicle space has only intensified in 2022, and Tesla has struggled to increase output while also slashing prices in key markets like China. “If you look at whenever competitors come in, Tesla’s market share gets decimated,” Johnson said. Meanwhile, Tesla’s market capitalization still remains above the next four largest automakers combined, he added.

Raising concerns

Tesla shares have struggled since Musk agreed to acquire Twitter for $44 billion earlier this year, then sued to try to get out of the deal. Since officially closing the deal in October, Musk has appeared to spend much of his time focused on the social media service and has reportedly pulled in employees of Tesla as well as SpaceX in an attempt to turn Twitter around.

Oppenheimer analyst Colin Rusch downgraded Tesla to perform in a Monday note, citing the maelstrom at Twitter and noting he had tried to ignore it previously. “While we continue to see Tesla evolving EV and autonomous technology in advance of peers and driving costs to levels those peers will struggle to match—and have tried to separate Elon Musk’s non-Tesla endeavors (personal and professional) from our analysis on TSLA—we believe Mr. Musk’s acquisition and subsequent management of Twitter now make that separation untenable,” Rusch said.

“The combination of Twitter’s unclear cash needs and diminishing options for Mr. Musk to serve those needs amid the broad public backlash driven by inconsistent standards application for Twitter users, notably banning select journalists, is pushing us to the sidelines,” Rusch continued. Meanwhile, Sen. Elizabeth Warren called on Tesla’s Chair Robyn Denholm to address concerns that the board has failed to meet its legal duties in not addressing its CEO’s behavior.