Tesla (NASDAQ:TSLA) has set its sights toward the heavens, seeking to revolutionize multiple industries while powering its way toward an $8.5 trillion valuation. The benchmark is crystal clear and spelled out in CEO Elon Musk’s ginormous compensation package that shareholders overwhelmingly approved earlier this month. Bulls are salivating over the trillions of dollars Tesla is pursuing, enamored by visions of robotaxis and humanoid robots.
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Of course, reaching these milestones, including one million robotaxis in operation and one million Optimus robots delivered, is no trivial matter. It will take enormous execution and no small amount of cash. That’s where top investor Chris Neiger spots trouble looming.
“Tesla has big plans for its future, but its significant investments are coming at a time when earnings and margins are falling,” explains the 5-star investor, who is among the top 1% of stock pros covered by TipRanks.
Neiger certainly understands Musk’s focus on robotaxis and robots, citing eye-watering figures for both industries in the years ahead. It therefore makes sense that Tesla is ramping up its R&D spending, which rose by 57% in the most recent quarter to $1.6 billion.
Unfortunately for Tesla, this increase is coinciding with struggles the company is facing with its bottom line. In the latest quarter, TSLA’s operating margin fell to 5.8%, far below the 10.8% it enjoyed just one year ago. Neiger mentions the removal of the $7,500 EV consumer tax credit as a major pressure point for Tesla.
“It will take billions of dollars more in investments in the coming years for Tesla to make progress on its goals, and if history is an indicator, the company will likely take longer to achieve them than initially planned,” adds the investor.
Contributing to the murky investment picture, Neiger notes that TSLA is trading at a very expensive price-to-earnings multiple of 297x, significantly higher than the S&P 500 average of some 31x.
Not surprisingly, the investor views TSLA as a losing bet, summing up: “With Tesla ramping up its spending, its margins falling, earnings sliding, and its stock priced for perfection, buying its shares and expecting them to set you up for life just doesn’t look realistic right now.” (To watch Neiger’s track record, click here)
Overall, Wall Street is conflicted when it comes to TSLA. With 14 Buys, and 10 Holds and Sells, each, TSLA carries a consensus Hold (i.e., Neutral) rating. Its 12-month average price target of $383.37 implies minimal downward movement in the year ahead. (See TSLA stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
