Tesla (NASDAQ:TSLA) came out of its Q4 2024 earnings call in bright spirits, despite weakening EV delivery and sales numbers. The market initially responded positively to CEO Elon Musk’s upbeat remarks on upcoming advancements in autonomous driving and robotics.
Maximize Your Portfolio with Data Driven Insights:
- Leverage the power of TipRanks' Smart Score, a data-driven tool to help you uncover top performing stocks and make informed investment decisions.
- Monitor your stock picks and compare them to top Wall Street Analysts' recommendations with Your Smart Portfolio
However, the optimism was short-lived. A decline in Tesla vehicle registrations across key European markets, coupled with the looming risk of Trump-era tariffs, weighed on sentiment, leading to a slight pullback in Tesla shares in the days that followed.
Still, Tesla stock isn’t exactly cheap – shares have surged 109% over the past year. Yet, one investor, known by the pseudonym Bluesea Research, remains skeptical, arguing that the lofty valuation just doesn’t add up.
“This bubble could burst sooner than expected,” predicts the 5-star investor.
With June 2025 expected to see the commercial launch of full self-driving (FSD), Bluesea counsels caution, explaining that any rollout will likely be fairly gradual (similar to Waymo). The investor adds that any delays could send share prices downhill fast.
“Any pushback of self-driving service or poor performance could cause a big correction in Tesla stock, making it very risky at the current price,” Bluesea added.
The investor acknowledges the bullish sentiment around Tesla due to its focus on innovation. That being said, Bluesea urges investors to remember the worrying indications emanating out of the company’s automotive segment, which make up some 70% of all company revenues. This includes 8% year-over-year revenue declines and gross margins that fell by 1%.
The investor notes that the darkening clouds over international commerce are another headwind buffeting TSLA’s sails. This is especially problematic for TSLA, as over half of the company’s revenues are sourced from outside the American market.
China in particular, which supplies more than 20% of Tesla’s revenues, is becoming increasingly competitive notes Bluesea, with BYD scraping away at TSLA’s market share.
“Tesla’s fundamentals are being ignored in the hopes that the company can launch compelling services and products,” Bluesea explains.
Doubtful that the company can live up to sky-high expectations, Bluesea slaps a Sell rating on TSLA shares. (To watch Bluesea Research’s track record, click here)
As for Wall Street? It’s just as conflicted. With 12 Buy, 12 Hold, and 9 Sell ratings, Tesla earns a consensus Hold (i.e., Neutral) rating. Meanwhile, its 12-month average price target of $338.85 suggests a potential ~14% downside from current levels. (See TSLA stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
