Is Michael Burry’s Tesla valuation warning justified?
00:00 Speaker A
Tesla’s valuation has come into question once again. This time by well-known investor Michael Burry. In a new substack post, Burry said Tesla’s market cap is ridiculously overvalued today and has been for a long time. Burry argues that stock-based compensation would further dilute Tesla shareholders. I had some fun today because I was in the mood again and asked GPT if Tesla’s shares were ridiculously overvalued. He responded with this answer.
00:31 Speaker A
The short answer is yes. The argument behind the output ranges from wild expectations around Tesla’s AI goals to weak electric vehicle sales. I’d like to ask this question to the opening bid roundtable. How overvalued or underrated is Tesla, Kenny?
00:48 Kenny
To be fair, I don’t own it. I don’t have a Tesla. I don’t own a Tesla and I don’t own stocks, right? I never did. So what do I think is overrated? I don’t know, I’ll have to look at the chart to see because it’s not a name I’m involved with. So it would be unfair for me to give you an opinion.
01:05 Speaker A
Allie, this is so hard. You know there will be a lawsuit. It was also not mentioned in the output of my chat GPT search. It’s tough to bet against an Elon Musk, especially when he’s motivated by a $1 trillion pay packet.
01:26 allie
Yes, that’s why you saw the reaction in stocks after the salary package was approved, because if you have Elon Musk on your side, that’s what investors want. You’re not just buying this stock for Tesla, you’re also buying it for Elon Musk. And what’s so interesting about this company is that the bears are extremely bearish and the bulls are extremely bullish. And, you know, Dan Ives, who you talked to Brian about, said it’s offensive at this point to call Tesla a car company, that they’re really an AI company, and that you have to look to the future when it comes to robot taxis and autonomous driving.
02:08 allie
I think you already see this in general. I’m seeing a lot more Waymos on social media, and I’m seeing a lot more articles about driverless technology. This will all come to a head at some point, and Tesla has the first mover advantage to do so. Of course you can always look at the valuation and say if it’s a little too hot, but at this point you can look at valuations across the entire stock market and make the same argument for every company, including Nvidia. So Tesla, of course, is just one of those who will always keep the Bulls and Bears moving forward.
02:44 Speaker A
Right. Uh James, you know, Tesla is of course one of the first companies which put crypto on its balance sheet. Zoom out a bit, given the volatility we’ve seen in crypto over the past month, is a move by companies to add crypto to their balance sheets to diversify their cash. Pending? Or do you think it will pick up again towards the end of the year?
03:07 James
Yeah, I think it doesn’t add to Tesla’s reliability at this point. Um, I wouldn’t call it DA, it’s a digital asset treasury company, MTR is kind of DA in pure form. Initially, companies had Bitcoin on their balance sheets for treasury management, for example for foreign exchange, due to fears about the devaluation of the US dollar. And that’s potentially a pretty convincing reason to do it, but now it’s being tarred with the same brush as MTR and perhaps making Tesla a bit irresponsible.
03:47 James
Ultimately, I think what they did was pretty credible, but I think there’s a pretty negative news flow around D in general right now. And I don’t think that helps Tesla, and Tesla has other challenges, you know, it’s not a pure electric vehicle leader anymore. It is losing market share to its European counterparts and is losing ground on price, range and technology etc. issues are in decline. In other words, margin contraction is the narrowing of margins. Therefore, there are many challenges ahead. So I agree with Michael Burry that it’s overvalued at this point.
