Exclusive: Even Tesla shareholders think the stock is too pricey

Rick Newman

Investors finally seem to have noticed that Tesla (TSLA) isn’t the only company in the world building cars.

Tesla shares have plunged 15% since July 1, on concerns that its two current all-electric vehicles, the Model S and Model X, are losing their luster, and its forthcoming sedan, the Model 3, might ramp up more slowly than expected. A bolt from the blue also arrived recently when Volvo—a traditional automaker!—announced it would phase out gas-powered models and rely solely on hybrids and electrics in the future. Only Tesla was supposed to be capable of something like that, you see.

Remember when Tesla’s market value eclipsed that of General Motors (GM) earlier this year, making it the most valuable US automaker? Er, no more. Telsa’s value has fallen back to $50.7 billion, while GM’s is at $52.1 billion. Tesla’s high-flying stock is still up 47% for the year, but the average price target among 19 analysts polled by S&P Capital IQ is $288, or 8% lower than the price is now. Goldman Sachs rates the stock a sell. And this comes as auto sales are dipping, and many buyers who have splurged in recent years are overbought.

Tesla shareholders are a fanatically loyal bunch, however, so Yahoo Finance ran a flash poll on July 6 asking our audience whether they felt Tesla’s shares are overvalued, undervalued or fairly valued. One surprising finding: Roughly one-third of Tesla’s own shareholders think the stock is overvalued. Of 2,098 survey respondents who said they’re long Tesla shares, here’s how they responded:

Again, those are Tesla shareholders, not interested bystanders or investors shorting the stock. Another surprise is that a far lower portion of the company’s shareholders think the stock will fall during the next year than think it is overvalued, as this chart shows:

So while 32.6% of Tesla shareholders think the stock is overvalued, only 13.9% think the stock will fall during the next 12 months. In other words, about 19% of Telsa stock owners think the shares are overvalued, but will keep going up anyway. Credit that to the magic touch, so far, of Tesla CEO Elon Musk.

For its many fans, Tesla is also a favorite of short-sellers expecting the stock to crater. Short interest accounts for about 18% of Tesla’s outstanding shares; it’s 2.2% for GM, 3.5% for Ford (F), 1.1% for Amazon (AMZN), and 1.2% at Apple (AAPL). At Nvidia (NVDA), another high-flier of late, short interest represents just 4.1% of shares.

Of 6,139 respondents to our survey, 29.2% identified themselves as Tesla short-sellers, and not surprisingly, almost all of them said Tesla’s shares are overvalued and due for a fall. Of 2,674 respondents with no position in Tesla, either long or short, 89.2% feel the shares are overvalued and 72.1% expect their value to fall during the next 12 months. Here’s the chart for folks with no position in Tesla:

Tesla’s fate hangs on the rollout of the Model 3, the company’s first vehicle with a base price below $40,000. Limited production is beginning now, but the vehicle won’t be widely available until 2018. Tesla needs just about everything to go right with the Model 3: minimal delays or quality problems, enthusiastic reviews, buyers willing to splurge for upgrades and a healthy economy keeping consumer confidence high.

While Tesla fans await the Model 3, other automakers are rolling out their own electrics and branching into all the newfangled realms Tesla is supposed to dominate: self-driving vehicles, shared cars, Internet-controlled rides. GM has a stake in ride-hailing service Lyft and will be selling its own electric Chevy Bolt nationwide by fall. Volvo’s reliance on hybrids — which have both a gas engine and an electric motor — as a bridge to whatever the future holds gives it a fallback plan if full electrics don’t catch on. Toyota, Honda, Volkswagen, Mercedes and BMW all have electric models out or coming soon, and they’re spreading their bets among many other types of propulsion. There’s a place for Tesla in the future, but investors are starting to realize it will be one among many, rather than an upstart conqueror dominating dinosaur has-beens.

Confidential tip line: rickjnewman@yahoo.com. Encrypted communication available.

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Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman