Market Overview

This Investor Was Short Tesla And Sees More Downside Ahead

This Investor Was Short Tesla And Sees More Downside Ahead

Although Tesla Motors Inc (NASDAQ: TSLA) reported better-than-expected second-quarter numbers on Wednesday after market close, the company's stock opened significantly lower on Thursday on concerns that the company would be making fewer car deliveries this year than previously anticipated.

John Thompson, CEO and CIO at Vilas Capital, was on CNBC after Tesla declared its numbers to share his outlook for the stock.

Massively Expensive Valuations

"We are actually short the stock," Thompson began. "We agree that it's a beautiful car. It's a lot of fun to drive. It's just— the problem is that at $100,000 price point for the average car, it's very limited market."

He continued, "And we don't think they are going to ramp into a mass market auto manufacturer, as the market is currently implying on its massively expensive valuations."

Related Link: Why Tesla Crashed Despite Beating Street Expectations

No Mass Demand

Thompson was asked if there is any catalyst that will change his view on the stock. He replied, "We think it's so massively overpriced that, I mean, to put it into perspective its got roughly a $35 billion market cap, when General Motors has a $50 billion market cap, Ford is $59 (billion) and Honda is $63 billion. I mean, this is a very, very, very small auto manufacturer.

"In fact, it's smaller than the Acura division of Honda, which is a very small piece of Honda, yet it has a market cap 40 percent less than Honda— So, I mean, the value implied in the stock price, it implies that the company is going to be on the order of a Honda or a Nissan or something like that, and we just don't think that there's demand for electric vehicles from the mass market," Thomson concluded.

At the time of this writing, shares of Tesla were trading down 10 percent.

Image Credit: Public Domain


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