Tesla Motors reported earnings today and the companies stock price continued it's descent since the 52-week high on September 30th of $194.50. The stock has lost nearly 25% since its 52-week high.
For those that read financial message boards, analyst reports, and even tweets about the company, the overarching sentiment is that the companies share price is substantially inflated. As it stands, the companies Market Cap of $18.5 billion puts it trading at a multiple of 11 times it's current sales. Today the company reported quarterly sales of $430 million suffering a loss of $38 million.
For a quick comparison of what other car manufacturers trade at, let's look at GM and Honda both trade at 30% of sales and 70% of sales, respectively. Thus, the 11 times sales for Tesla has likely inflated the companies valuation. Based on the competitors, the multiple should be substantially lower for Tesla, but since Tesla has tremendous growth potential don't expect them to trade the same multiple as these establish brands (just yet anyways).
It is likely the current trading has been on expectations for the companies future. They are building a solid brand and the company has experience tremendous demand for their Tesla Model S cars. Thus, the company has the basics in place to continue with their rapid growth. However, until the company can meet this demand by building the necessary infrastructure, the companies stock price is likely to continue to decline as this infrastructure will likely lead to losses over the next few quarters.
After seeing the recent price decline and trading action for Tesla, what are your thoughts on the future? Where will the bottom be for this stock price? Please share your thoughts.
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