The stock price of Elon Musk’s company Tesla has risen 800 percent in the past year. However, some of the biggest share-holders of the California-based firm are trimming their stakes.
Investment researchers have warned that even though Tesla’s stock may rise 400 percent this year, it is the most dangerous stock on Wall Street as the fundamentals do not support its high price and valuation.
Stating that this might be one of the biggest house of cards waiting to fold, New Constructs CEO David Trainer told CNBC’s ‘Trading Nation’ that no matter what the company’s future road map is, the price of the stock shows that the prices are going to be higher.
“Whatever best-case scenario you want to paint for what Tesla’s going to do – whether they’re going to produce 30 million cars within the next 10 years, and get in the insurance business and have the same high margins as Toyota, the most efficient car company with scale of all-time – even if you do believe all that is true, the stock price is still implying that profits are going to be even bigger than that,” he said.
In past one year alone, Tesla stock has risen 800 percent, with last week proving to be volatile for the firm. The company’s shares were last trading down around 4% on the day at 32 at 327.45 euros ($387.54) per share in Frankfurt.
Trainer also warned that the company stock split may be detrimental for the new investors.
“Stock splits are inconsequential to value. They’re not changing the size, they’re just dividing it up into more pieces. Honestly, I look at the stock split as a way to lure more unsuspecting, less sophisticated traders into just trying to chase this stock up and that is not a real strategy,” he said.
Meanwhile, Teslas’s largest outside shareholder, investment management company Baillie Gifford, has also trimmed its stake.