Bernstein analyst Toni Sacconaghi has reflected on Tesla (NASDAQ:TSLA) shares amid the recent market volatility.
Tesla's share price fell nearly 38% from November highs to hit a multi-month low last month. Since the February 23 low, Tesla stock price has soared over 32% to return trading above the $1,000 handle.
Moreover, Tesla shares are up a further 6.5% in pre-open Monday on an announced stock split.
Sacconaghi noted that TSLA has been remarkably resilient amid a market pullback that hit growth stocks the most.
"Tesla's EPS estimates have climbed 30%, while traditional auto OEMs have fallen 8% - accordingly, on a relative basis, valuation have converged by ~ 40%. The same is true among other EV markers, where relative valuations have fallen by about 30% vs. traditional auto OEMs. So is the recent valuation change reflective of the broader market rotation, or are investors getting more comfortable with traditional auto OEMs future prospects and ability to compete in an EV world? The data supports the former, but there may be some modest fundamental compression in relative valuations as well," the analyst said in a client note.
Still, Tesla is valued at around $1.1 trillion by the market today, while Sacconaghi reminds investors that the14 largest traditional auto OEMs (who sell 99% of all cars, including 2% that are electric) have a collective market cap of $0.9T.
Hence, Tesla's market cap concentration (86% of the EV space, and 49% of the automotive space appears at odds with the fragmented and global nature of the auto market.
Net-net, Sacconaghi reiterated an Underperform rating and a $450.00 per share price target on Tesla as risk/reward at current levels is not attractive.
By Senad Karaahmetovic