Devonshire Research states Tesla Motor Inc is overvalued, it will lose competitive edge, and it is negatively affecting the environment despite being an innovative and green-energy company
Published By: Ken Bock on March 22, 2016 01:54 pm EST
After surging for a seventh consecutive trading session, Tesla Motors Inc (NASDAQ:TSLA) shares are in the red zone today, putting an end to the strong momentum. The stock fell after Devonshire Research Group issued a bearish note on Tesla’s technology and intellectual property.
Tesla shares hit an intra-day low of $234.16 on Tuesday, declining as much as 1.74%.
The firm published a research presentation Tuesday, stating that Tesla stock is overpriced, despite developing unique products, stimulating demand, and significant gaining brand value. The company has not generated any earnings since its initial public offering in July, 2010 and still it revenue multiples are trading several times higher than closest competitors.
A handful of companies which are trading near Tesla’s multiples are in biotech, social media software sectors, which have different financial profiles. Devon believes level of innovation at Tesla is remarkable, but massive research and development (R&D) costs and growing brand value do not justify the stock’s current valuation.
Additionally, the company’s patent holdings are overshadowed by its tech competitors, restricting autonomy to operate in the EV market, where its technology position is modest. The research firm thinks that the company is far behind Daimler, Ford, General Motors, Toyota, and other automakers. The company’s decision to make its intellectual property public has taken away its competitive edge, allowing rivals to openly copy its precious offerings.
Lastly, Tesla’s expenses are greatly reliant on its bargaining positions with suppliers, who can increase prices for providing superior technologies. Devonshire thinks that these decisions would negatively affect Tesla and market leadership in the future.
The investment firm regards Tesla as an environmental friendly company but believes that its batteries’ disposal could create heavy toxic waste and EV production emits more carbon than a fuel-based vehicle. Instead of reducing pollution and make the world a better place to live, Tesla is contributing negatively to the environment, Devonshire stated.