Since the beginning of June, the stock of e-commerce giant Amazon (AMZN) has plunged another -15%. This is even after many investors jumped in quickly because the price had visually cheapened. Tesla is getting ready to follow suit.
Tesla Plans Split of 3:1
In principle, a stock split does not change the valuation of a company. Now, however, Tesla (TSLA), like Amazon before it, wants to resort to this optical trick and make its share certificates a little smaller for small investors.
The US company has announced a 3:1 split. The price then divides by three and the number of shares triples. However, this will hardly improve Tesla’s chart condition.
Share Valued at P/E Ratio of 54 Despite Correction
What we’re currently witnessing on the stock markets is the unwinding of historically high valuations. As you can see from the chart above, Tesla has also corrected sharply.
True, the stock is no longer valued at a P/E ratio of over 100, as it was last year. However, a P/E of 54 based on this year’s earnings estimate can’t be called a bargain either.
Analysts Ignore High Valuation
Some analysts, however, see things differently. According to the Wall Street Journal, 27 of 44 analysts recommend buying or topping up Tesla, 12 advise holding and five analysts want to sell.
Incidentally, the average analyst price target is $968. That would put the P/E ratio at over 80. Daimler, by the way, has a P/E ratio of 6.
In conclusion, Tesla has lost its unique selling proposition as an EV manufacturer. Every car brand now builds vehicles with electric drives. The German premium brands in particular are now taking off. In contrast, Tesla’s stock is still absurdly highly valued.
