Gordon Johnson, GLJ Research CEO & Founder has downgraded the stock of the electric vehicle giant to $87.
Gordon arguably the most bearish Tesla Stock analyst. Gordon was on Yahoo Finance’s The First Trade with Brian Sozzi to discuss why he remains bearish Tesla, as investors keep an eye on the stock split set to be distributed after market close on August 28th.
Tesla Is Detached From Reality
The price target is $87 per share, that’s a 2021 year price target. Tesla is detached from reality. Tesla is trading at more than double VW market cap, yet VW sold about 11 million cars last year, Tesla sold just under 307,000 last year, and Tesla is looking to sell roughly 500 cars this year.
Tesla US order peaked in the 4th quarter of 2018. They haven’t had higher US sales since the Q4 2018. Their US gross margin peaked in the 3rd quarter of 2018, Their global sales peaked essentially in the 4th quarter of 2018. IN the 2nd quarter of 2020, they lost $300 million.
We had a tulip bubble a hundred years ago when people kept buying bulb.
Analysts re saying Tesla is seeing strong growth in China, here is the reality, the reality is in July they sold about 11,400 cars in China, and they produced about 12,200, so they built inventories and that’s the spike. They are cutting the price of their cars, they have another facility in China, and yet they are selling fewer cars, so we think the reality is much different than what’s being pumped out there. We think the stock price is driving the analyst’s opinions, which is pro-founding to us versus reality.
Tesla Quarterly Revenue
Over the history of Tesla, I think it’s like 32 quarters, and only 4 of those 32 quarters have they had a positive net income excluding credit revenue sales. The problem is all those car companies are now selling electric cars, and Tesla is guiding their Credit Revenue sales to be down about 50% after this year. Their core business is loss-making. If you take the credit revenue away, they lost 300 million last quarter.
We believe by the end of next year, Tesla Share price will be at $87 per share.
Tesla Has No Secret Sauce
Tesla doesn’t make its own battery. Anybody can buy the battery from Panasonic, LG, and CATL. but nobody is buying them. “There is no secret sauce”.
If Tesla is a technology leader, why has their R&D dropped from 12% in 2017, to 5% the lowest amount in the history of the company? Their sales of FSD in a number of different countries has fallen by 50%. It’s a huge disconnect, reality vs what people are saying. We think when the real data matches up, we going to see the stock lower.
Tesla is comparable to AOL not Amazon because we think they have technology that is outdated. Tesla doesn’t lead in technology. I don’t think people understand what they own in Tesla. I don’t think they are the technology leader, and I think that will be proven this year.
Gordon’s argument is based on credit revenue, and that Tesla will not be profitable next year because other car companies are now manufacturing electric vehicles, which means no credit revenue for Tesla going forward.
He also argues that Tesla is not making their own battery and that Tesla battery is sold to them by other battery makers, which can also be sold to other carmakers.
Guys what do you think about Gordon’s opinion?.