While Tesla’s future remains a topic of intense debate within financial circles, a noted Tesla short-seller has turned his attention to two traditional automotive giants. This strategist sees significant upside potential for both Mercedes Benz and Stellantis, suggesting that shares in these companies could double in value.
The source of this contrarian perspective is the managing partner of an investment management firm focused on clean energy transitions. This individual, with a history of successfully predicting market shifts (such as the 2018 carbon price rally), holds a short position in Tesla and believes the EV maker’s meteoric rise may be reaching its end.
This analyst highlights the recent miss in Tesla’s first-quarter vehicle deliveries as a possible turning point for investor sentiment. In their view, the overinflated expectations surrounding Tesla have fueled its substantial market bubble. It’s a bubble they believe is now poised to deflate.
In contrast, this analyst points out, established automakers have been quietly delivering solid performance. Stellantis, home to iconic brands like Chrysler, Jeep, and Fiat, has achieved nearly 100% total return in the past two years. Mercedes, another automotive powerhouse, has also generated significant returns for investors, albeit to a slightly lesser degree. Yet, despite these results, both Stellantis and Mercedes trade at relatively low price-to-earnings (P/E) ratios compared to Tesla.
One of our analysts notes that this discrepancy suggests a fundamental undervaluation of traditional automakers. Investors, heavily focused on the EV boom, may be overly pessimistic towards the legacy giants of the automotive industry. They also posit that Tesla’s valuation may be more tied to hype around AI and self-driving capabilities than to concrete fundamentals. This raises questions about the true value of Tesla’s software at its current stage.
Interestingly, the analyst points out that Mercedes has a strategic partnership with AI chipmaker Nvidia – a key player in the development of software-defined vehicles. From their perspective, these factors further support a bullish outlook on both Stellantis and Mercedes, especially as operating margins, balance sheets, and investor alignment demonstrate strengths within these companies.
Should market valuations for these traditional automakers shift to align with those of other large industrial companies, a doubling of share price for Stellantis and Mercedes becomes a plausible scenario. Time will tell if this prediction holds true.
Important Considerations
It’s important to remember that stock markets are subject to volatility and past performance doesn’t guarantee future outcomes. Investors are encouraged to conduct thorough research and exercise informed judgment before making investment decisions.
