Tesla (NASDAQ: TSLA) has a brand new short seller in Bill Miller, and he believes the company’s downfall lies in its decreasing market share.
Miller was Chairman and CIO of Legg Mason Capital Management and is likely best known for outperforming the S&P 500 index for fifteen straight years. His newest investment seems to be a short position against Tesla stock, as Miller believes the company is facing increased competition, which is bound to eventually dethrone the automaker as the king of EVs.
“I shorted it recently. I shorted more [Friday]. If it goes up, I’ll short more,” Miller said on CNBC late last week (via BI).
For Miller, it is not about the company and its products, it’s about the numbers.
“I think Tesla has been a phenomenal company,” Miller said. “I think Elon Musk is a genius.”
However, Miller’s fundamental philosophy on investing has him skeptical of Tesla’s market cap, which is currently $378.2B, more than double that of Toyota, with $193.16B, and roughly seven times the size of GM, which has a $51.03B market cap. “I just don’t think it’s worth more than the Top 5 automakers in the world combined,” he said. “And all of them are coming with electric vehicles.”
Compound Miller’s thoughts on Tesla’s valuation with recent events that have transpired, and you have an encapsulation of his entire thesis on why he is shorting the stock. Miller believes the loss in overall market share, along with cutting prices in various markets, has Tesla on its knees.
“Tesla is now losing market share. They’re cutting price,” he said. “It’s a phenomenal company, but it’s not worth $380 billion, in my opinion.”
Tesla has certainly felt the economic pressures over the past few years, dating back to the COVID-19 pandemic. Last year, the stock fell over 60 percent, which was drastic, but the fall was not uncommon across the sector.
Even still, Miller is adamant that Tesla is a car company, not a tech company. “Tesla is much more profitable than the current auto companies,” he said. “It has a lot of free cash flow. The earnings multiple if you consider it a tech stock is not out of whack, certainly with its dominance in electric vehicles.”
But the thing that separates Tesla from other tech stocks is that the automotive business has “too much capacity” with low returns on capital for investors, Miller stated.
Tesla was down just 1.19 percent on Monday at 9:53 am on the East Coast.
Disclosure: Joey Klender is a TSLA Shareholder.
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