Marc Faber: Tesla Stock Could Hit $0.00
The man likes to be called Dr. Doom, sometimes Dr. Ruin. He earned those titles thanks to his often dire predictions about the financial markets. Usually, Swiss investment expert Marc Faber distributes his venom to general targets, such as the overall market, a country or group of countries, and specific sectors. But Faber has beaten specific stocks over the head too, when he feels their valuations have gone off the deep end. Tesla Motors Inc (NASDAQ:TSLA) is Faber’s latest such target. It’s safe to say Faber is rather bearish on Tesla stock.
Marc Faber, who publishes the Gloom, Boom & Doom Report, points to Tesla stock and the massive valuation, as its chart clearly shows. Then he points out that the emperor has no clothes. Faber simply states that the kinds of cars that Tesla makes can easily be made by Mercedes, BMW, Toyota, or Nissan. Ultimately, any carmaker in the world can make cars like Tesla, but at a lower cost and much more efficiently, said Faber. (Source: “Marc Faber on Tesla and more,” CNBC, August 8, 2016.)
Faber has recommended that investors short sell the lights out of TSLA stock, going to $0.00 in his view. In the view of investment professionals, there is only one reason why Tesla stock has fared well so far: the company still maintains a reasonably unrivaled spot in its niche. The electric car market has not yet become big enough for a company like Toyota or any of the other main car companies.
But the moment when that market becomes large enough, others will jump on the electric bandwagon, said Faber. And then Tesla will get a lot of competition. For Faber, investors cannot ignore this scenario in terms of Tesla’s business prospects and future performance. Marc Faber advises shorting Tesla stock.
Meanwhile, Tesla reported much steeper losses than expected last week, so Faber has more fodder for his bearish argument on TSLA stock. Tesla management announced a much-steeper-than-expected quarterly loss on August 3 after the end of U.S. trading. The loss amounted to $1.06 per share on revenue of $1.56 billion, while analysts expected a loss of only $0.52 per share on revenue of $1.6 billion. Tesla’s net loss in the second quarter widened to $293.0 million from $184.0 million a year ago. The increase in sales could not offset the large cost of increasing production.
Marc Faber might be exaggerating with his “$0.00 per share” expectations, but he’s not alone in expressing diffidence over TSLA shares. Many analysts point out the company’s failure to meet CEO Elon Musk’s goals and the company’s legions of fans’ expectations. For example, there are doubts about Tesla’s ability to start production of the “Model 3” by 2017 after it has gathered some 373,000 pre-orders. Tesla said it sold customers only 14,400 vehicles instead of the planned 17,000 cars for the latest quarter. The data shows that the automaker continues to struggle with production problems and is highly unlikely to meet its full-year plan. No wonder Faber is skeptical. Tesla says it will reach production of 500,000 cars a year by 2018. Faber wonders how that might be possible.