Tesla's skyrocketing share price has made the luxury electric car maker one of the hottest tech stories of the year, but its inventory is "houses of cards" waiting to be rolled out, says one Wall Street strategist.
This was announced by David Trainer, CEO of research company New Constructs.
He told CNBC's Trading Nation last week, "We think this is big, big - one of the biggest house of cards of all time, getting ready to fold."
“Whatever best-case scenario you describe for what Tesla is going to do - are they going to produce 30 million cars over the next 10 years, are they in the insurance business and have the same high margins as Toyota, an efficient car company with an unrivaled scale, ”he said. "Even if you believe that all of this is true, the stock price still implies that the profit will be even greater."
With a current average selling price of $ 57,000 and an assumption of 10.9 million vehicles sold by 2030, Tesla's market share is only 42%, Trainer said.
Tesla shares are up nearly 800% in the past year alone and are trading at an estimated 159x earnings. Its shares traded about 4% lower on the last day at 327.45 euros ($ 387.54) per share in Frankfurt.
The past week was unstable for the company.
Shares closed 7% lower on Friday, the fourth consecutive day of declines, including a 9% drop on Thursday amid a sharp tech sell-off that sent all three major Wall Street indexes down.
The company's shares have already plunged 6% on Wednesday after Bailey Gifford, the company's largest shareholder, said it cut its stake in the company due to internal rules limiting the weight of one share in client portfolios.
Trainer said the Tesla stock split that occurred last week is dangerous for new investors to trade in the stock.
“To be honest, I look at splitting stocks as a way to seduce more unsuspecting, less sophisticated traders, just trying to chase those stocks, and that's not a real strategy,” he said.
While Trainer applauds Tesla CEO Elon Musk for making electric cars more popular, the company's weak fundamentals mean he won't touch the stock.
Trainer said: "Tesla is not in the top 10 for market share or vehicle sales in Europe for electric vehicles, and that's because laws in Europe have changed that strongly encouraged incumbent manufacturers to produce hybrids and electric vehicles." “The same is happening in the United States. I think we are actually talking about something closer to $ 50, and not about $ 500 as the real value, ”he added.