Tesla Motors Inc (TSLA): NYU Prof Aswath Damodaran Says Stock Is Too High

Posted Sep 7, 2013

Aswath Damodaran is a Finance professor at the Stern School of Business at New York University (NYU).  He teaches corporate finance and equity valuation at the university.  He has also written several books on equity valuation, corporate finance, and investments.  Professor Damodaran claims that Tesla Motors Inc (NASDAQ:TSLA) is trading much higher than what it should be.  He believes that Tesla Motors shares should be worth around $67.12 per share today. Currently the stock price of Tesla is above $160.

Damodaran’s Opinion

Below is an excerpt from Damodaran’s blog post:

“At its current stock price of $168.76/share, the market capitalization for the company is more than $20 billion. The question for investors, both in and out of the stock, is not whether the company was a good investment over the last year (of course, it was) but whether it is a good investment today. You can download the most recent annual and quarterly reports for the company.

Using the standard metrics, the company seems  over valued. With revenues of $1.33 billion and an operating loss of -$217 million over the last twelve months, it seems absurd to attach a value of more than $20 billion to the company. At close to 15.4 times revenues, Tesla is being valued more like a young technology company than an automobile company. However, these standard metrics are also often misleading with young companies, since value should be driven not by revenues and earnings today but by expectations for these values in the future.”

Should You Listen To Damodaran?

Damodaran was correct when he shorted Apple recently.  However, he was wrong about Facebook when he said that it might be time to sell Facebook’s shares.  Facebook’s shares increased quite a bit since he made his recommendation.

Damodaran is not the only one that believes that the stock market is being generous to Tesla Motors Inc (NASDAQ:TSLA).  Tesla’s CEO Elon Musk was quoted as saying that the “market is being very generous.”

[Image Credit: Damodaran’s Blogspot]