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Former hedge fund manager Whitney Tilson called Tesla’s outlook “grim” and said he would not touch the stock with a 10-foot pole, citing its extreme valuation and downward trend. No price or volume move was reported.
The article
Tesla Outlook is 'Grim,' Former Hedge Fund Manager Won’t Touch Stock 'With 10-Foot Pole' Tesla Inc (NASDAQ:TSLA) beat analyst estimates for revenue and earnings per share in the third quarter. A former hedge fund manager thinks investors should pay attention to other metrics like operating margins, operating income and free cash flow, which make the stock look expensive, even for a growth name. Whitney Tilson on Tesla Stock Tesla’s third quarter had several positives, with revenue, earnings per share and deliveries all higher than analyst estimates. Former hedge fund manager Whitney Tilson says that other metrics were much worse. "For a growth stock, the YOY comparisons were grim: revenue was flat, and operating margin tumbled from 5.8% to 2.6%. That resulted in operating income, EPS, and free cash flow crashing 56%, 44%, and 62%, respectively," Tilson said in a daily newsletter. Sharing several charts in the newsletter, Tilson said revenue is up over the last five years, but operating income "has plunged." This comes with Tesla’s operating margins also tumbling after peaking at 19.2% in the first quarter of 2022. Tilson said free cash flow has also "stagnated" over the past five years. "Despite this dismal performance, the stock hasn’t cratered – it has been flat over the past five years." Tesla stock is up 24% over the last five years as of the time of writing Friday. Tilson calls it shocking that Tesla stock trades at 185 times its forward price-to-earnings ratio, which is even higher than 115x multiple five years ago. The former hedge fund manager asks his analyst to highlight why this might be for Tesla. The analyst Kevin DeCamp highlights Tesla’s robotaxi expansion, full self-driving, the Cybercab, increased production of the Tesla Semi and demand for Tesla Energy products. Read Also: SpaceX Stock Overvalued By $1 Trillion: Former Hedge Funder Says ‘Most Overvalued Large Cap Stock of All Time’ Betting Against Tesla Stock? While Tilson lays out plenty of reasons not to invest in Tesla, he stops shy of recommending investors to short the stock or bet against CEO Elon Musk. "I would never bet against Musk and his team. They’ve create huge value by achieving things that boggle my mind." Tilson himself will not be investing in Tesla stock though. "With most of Tesla’s fundamentals trending downward and the stock still trading at an extreme valuation, I wouldn’t touch it with a 10-foot pole." Read Also: AI Bubble Could Be Ready to Pop and Jim Cramer May Be the Warning Sign Image via Shutterstock