Tesla (NASDAQ:TSLA) CEO Elon Musk might be arrogant about his Model S, but he is also realistic about the company’s share price, and he hinted at a warning Thursday that the stock is overvalued. Musk was the subject of a Bloomberg Television interview when he made the weighty remark, but the statement was followed up by his explanation of the Model S fire, and that effectively won most of the interviewer’s attention.
Nonetheless, the CEO made his point when he asserted that, “The stock price that we have is more than we any right to deserve,” and he also added the warning, “It’s difficult to predict where it goes in the short- and medium-term, but I do feel good about having the company achieved that value more in the long-term.”
It’s easy to understand why the CEO is concerned over Tesla’s rising stock price, as CNN highlights that shares are up 400 percent this year and are trading at almost 100 times the company’s earnings estimates, but investors are still not exactly heeding warnings. Musk offered similar indications back in August that shares are rising too high, but the stock has jumped 10 percent since then, and that pattern doesn’t appear to be slowing.
CNN highlights that Tesla’s possible overvaluation mirrors that of Netflix’s (NASDAQ:NFLX) in 2003. Back then, CEO Reed Hastings warned that the company’s stock was rising too quickly, and investors learned that the hard way when it plunged in 2004 and has been volatile ever since. Coincidentally, Netflix’s stock is up again, this time at 260 percent, and Hastings offered another note of caution this week.
Despite the warnings, it’s safe to say that investors don’t always learn from their mistakes, and Musk just hopes he isn’t the next CEO to facilitate a disappointment. It’s no doubt hard to back off from a rising stock, and many investors aren’t like Carl Ichan who just recently sold half of his stake in Netflix. However, it’s also important for bankers to heed warnings, especially when they’re delivered from the CEO himself.
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