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The massive rally in shares of Tesla Motors (NASDAQ:TSLA) from $250 to as high as $968 over the last several months has not changed one bearish analyst’s mind on the stock.
Gordon Johnson, founder of GLJ Research, maintained his long-held bearish view on Thursday’s PreMarket Prep, saying he has serious doubts as to whether the company can ever justify its valuation.
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"For Tesla to get to fundamentally where it’s valued at there has to be tremendous growth," he said. "Their revenue is already declining, yet it’s being valued as if it’s going to have tremendous growth."
Johnson also questions what would happen should there be a slowdown in the economy, which would make it more difficult for businesses to borrow money.
"When you look at Tesla, and this applies to a lot of companies, Tesla has a lot of debt. We’re in this environment where a lot of investors are putting money into companies that are perpetual lossmakers," he said. "And that’s fine when the credit markets are flowing. But do you think banks are going to be chomping at the bit to lend Tesla or any auto company money right now given the outlook? If the credit markets dry up, I think you’re going to have a severe effect on a lot of what I think of are unicorn stocks, where they don’t make money but there’s a perpetual growth narrative."
Johnson has a Sell rating and $61.57 price target on Tesla's stock.
The Effect Of Coronavirus
Johnson also believes the market is not yet pricing in the full impact of the novel coronavirus. He noted that during the 2003 SARS outbreak, the S&P 500 fell 16% despite the fact that the contagion was primarily contained in China. Because China now represents a greater share of the world’s GDP, the market is near all-time highs, and the coronavirus death toll has already surpassed SARS, he believes things could get worse for investors before they get better.
"We think the impact is going to be much worse than feared. The impact to pretty much everybody is going to be profound, and we think the market is underestimating that," he said.
For the full discussion with Johnson click here.
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Featured Guests
Gordon Johnson Founder of GLJ Research
Gordon Johnson has more than 8 years of experience as an equity research analyst and was recently ranked by Bloomberg among the top stock pickers in the solar space since initiating coverage in 2008. Prior to focusing on the solar sector, Johnson covered semiconductor technology and solar companies at Lehman Brothers. He received a BA with a major in both Finance and Economics from Morehouse College in Atlanta. Johnson has been recognized for his accurate stock picks in numerous publications including Bloomberg, Barron’s, Forbes, The Wall Street Journal, Reuters, FT.Times, and TheStreet.com. Gordon has also had numerous appearances on Bloomberg T.V. and CNBC.
Gordon’s full interview can be viewed at 17:00 in the video below or by clicking here.
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PreMarket Prep is a daily trading show hosted by prop trader Dennis Dick and former floor trader Joel Elconin. You can watch PreMarket Prep live every day from 8-9 a.m. ET here. The replay can be found on Benzinga's YouTube channel, and the podcast is on iTunes, Google Play, Soundcloud, Stitcher and Tunein.
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Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.