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‘Overvalued’ Tesla Stock Makes CEO Elon Musk Richer


May. 5 2020, Published 9:21 a.m. ET

  • On May 1, Tesla (NASDAQ:TSLA) stock fell. CEO Elon Musk said that the company’s price is high. Several analysts also said that Tesla’s valuation is too high.
  • The spike in the stock has increased Musk’s wealth. Now, he might get richer by another $700 million.
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Is Tesla stock overvalued?

On May 1, Tesla CEO Elon Musk tweeted, “Tesla stock price is too high imo.” The stock fell sharply on the same day, which brought some respite to short sellers. Tesla short-sellers think that the stock is overvalued and could fall. Recently, David Einhorn questioned the company’s accounting policies after its surprise first-quarter profit. However, Musk’s tweet was a delight for short-sellers like Einhorn and Jim Chanos. Last month, Chanos revealed that he increased his short positions on the stock.

Tesla’s valuation

A large section of the market thinks that Tesla is overvalued. The company is trading at a sharp premium to its consensus target price, which suggests that analysts see the stock as overvalued. Some bearish analysts see the stock falling to zero as well. However, Tesla stock bulls have an astronomically high target price on the stock. Eventually, Tesla stock’s valuation boils down to views on the electric vehicle industry and our opinion of Musk. Undeniably, the company has a lead in electric vehicles. Even Tesla’s rivals admire its software and battery capability.

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Ashwath Damodaran’s view

Ashwath Damodaran, an analyst popularly known as the “dean of valuation,” has a very bearish view on Tesla stock. In June 2019, he valued the stock at $190 per share. Earlier this year, the company’s share price touched almost $1,000. Based on Monday’s closing price, the stock is over four times higher than Damodaran’s value last year.

More wealth for Elon Musk and Jeff Bezos

Despite questions about Tesla stock’s valuation, Musk keeps getting richer. He’s second on the list of billionaires that have added to their wealth this year, according to a report from the Institute for Policy Study. Bezos is first on the list. Amazon stock has risen to record highs despite the COVID-19 pandemic.

Now, Musk might be eligible for a $700 million payday, according to a Reuters report. He doesn’t get a salary or bonus as the company’s CEO. His compensation is based on revenue and profit milestones and the company’s market capitalization.


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