Finding companies to put on one’s watch list is important, and in this environment, I think Tesla Inc. (NASDAQ:TSLA) is a great example of a company to keep on your watch list rather than your buy list.
In a research note last week, JP Morgan analyst Ryan Brinkman wrote that Tesla shares are “dramatically” overvalued at these levels, cautioning investors about specific valuation-related concerns investors ought to have with this darling stock. Questions about what is driving the valuation increase in the electric vehicle (EV) maker came to light, with concerns around the 800% increase investors have witnessed in this stock over the past couple years, a rather dramatic jump.
Perhaps no stock is as divisive as this one, with a rather large divide between bulls and bears at the time being. With the company’s stock likely to be added to the S&P500 shortly, investor optimism around capital inflows into this stock that will be mandated via ETF inflows as a result of the listing have driven shares higher despite indications that the underlying fundamentals of the company warrant such a move.
As with all high-flying stocks like this one, investors need to be very careful. Large upside moves like we’ve seen of late in Tesla shares can reverse, and investors buying in at these levels have elevated risks to the downside should market sentiment markedly shift.
Invest wisely, my friends.