Wall Street values Tesla Motors at $620,000 per car

Tue May 3, 2016 2:05pm EDT
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By Noel Randewich

SAN FRANCISCO May 3 (Reuters) - Company founder and CEO Elon Musk may not mention Tesla Motors Inc's stock price when his electric car company gives its latest financial update on Wednesday, but it will be front and center for investors divided over its seemingly rich valuation.

After a rally that ended in April, Tesla's market capitalization is currently about $31 billion - equivalent to $620,000 for every car it delivered last year, or $63,000 for every car it hopes to produce in 2020.

By comparison, General Motors Co's $48 billion market value is equivalent to about $4,800 for every vehicle it sold last year.

Tesla's heady valuation - about 125 times the next 12 months of expected earnings - and the implication that shareholders may be overpaying for Musk's small but fast-growing luxury car company have made the stock a favorite of short sellers.

Short sellers borrow shares and then sell them, hoping to buy them back later at a cheaper price.

Tesla is among the world's 10 most-shorted companies by market value, even after an 85 percent rally earlier this year scalded some of those short sellers. In the past month, short bets against Tesla fell by over $1 billion, but are still above $6 billion, according to financial analytics firm S3 Partners.

"This is not just day traders coming in and out of the market. This is fundamental guys who have put it in their portfolio and are saying, 'We don't believe this valuation is correct,'" said Ihor Dusaniwsky, S3's head of research.

Vilas Capital Management Chief Executive John Thompson, one of those short sellers, said he believes investors underestimate the hurdles Tesla faces trying to rapidly increase production, including the cost to build future high-end robotic assembly lines.   Continued...