It’s not time to buy shares of Tesla, despite recent analyst optimism, one trader says.
The electric-auto maker’s stock climbed nearly 2% on Wednesday after Deutsche Bank reiterated its buy rating, saying no U.S. competitor “comes close” to Tesla’s market leadership, and New Street Research issued a Street-high price target nearly 48% above Tuesday’s closing levels.
Though the stock is down about 6% since Nov. 1, this is far from an ideal entry point, Tocqueville Asset Management portfolio manager John Petrides told CNBC’s “Trading Nation” on Wednesday.
“Take a step back and ask yourself, if you didn’t own the stock today, would you buy it? And it’s hard to get on board from a fundamental standpoint,” he said.
Tesla may be dominating the electric-vehicle market, but its stock is trading at extremely elevated multiples: around 22 times price to sales, 180 times enterprise value to earnings before interest, tax, depreciation and amortization and nearly 160 times price to earnings, Petrides warned.
“I think the bar has been set so high that the margin of safety is just nowhere to be found for the stock,” he said.
Tesla’s stock could also be risky on a technical basis, Miller Tabak’s Matt Maley said in the same interview.
With the Federal Reserve considering an accelerated tightening timeline and China’s government clamping down on corporate debt, leverage and risk-taking, liquidity-driven stocks such as Tesla could have a difficult run in 2022, the firm’s chief market strategist warned.
“Some of these innovative stocks are going to have to pull back a little bit even if Deutsche Bank is right on the fundamental outlook,” Maley said.
With Tesla shares declining to key support at their 50-day moving average, a break below that could forecast more trouble, he said.
“If it breaks below that level, which is just below $1,000, not only will it take it below the 50-day moving average, but also give it its first lower low in over six months,” he said.
“If we break below that, it’s going to be very vulnerable to a much further drop, maybe even as far down as its 200-day moving average,” Maley said.
Tesla shares fell by less than 2.5% in early Thursday trading to around $1,044.44.