Luke Lloyd says he will never invest in Tesla: here’s why he is right

Tesla Inc.’s (NASDAQ:TSLA) shares gained 1.76% on Monday following last week’s unveiling of the fastest Model S car, the Model S Plaid. The company’s stock is now up more than 210% in the previous 12 months. However, its current valuation multiples are too steep for some investors. Wealth advisor and strategist Luke Lloyd told Fox ahead of Musk’s event that he would never invest in Tesla. The company’s shares are down more than 30% from current historical highs of about $900 reached in January this year.

Why Luke Lloyd is right on Tesla’s steep valuation

Tesla stock has pulled back more than 30% over the last five months. However, it still trades at a steep price-earnings ratio of 625.18. Tesla’s share price spiked between November and January before the current pullback. Elon Musk’s tweets and increased market speculation played a crucial role. Lloyd said the company’s stock price relies a lot on hype than actual fundamentals. He may be right.

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Tesla is the market leader in the manufacture of electric vehicles. Gasoline automobile manufacturers are beginning to quickly catch up with Ford Motor Co. (NYSE:F) and General Motors Co. (NYSE:GM), shifting focus towards EVs. Therefore, the company’s long-term future will face a stiffer challenge than the one it has faced since its inception. As such, the company’s long-term growth projections may not be achievable.

Furthermore, electric vehicles are significantly expensive. Several people still opt for gasoline vehicles.

On a positive note, Tesla’s projected 165% EPS growth for this year and next year’s growth of more than 37% are compelling. The company trades at a forward P/E ratio of 97.94, which implies more upside potential.

Technical overview

Technically, Tesla’s share price appears to have pulled back in a bearish triangle formation. The stock hit a new all-time high in January but has since fallen to trade below the 100-day moving average.

Investors can target rebound profits at around $691.01 or higher at $750.24. On the other hand, bearish investors can target extended declines at $554.03 or lower at $481.83.

Bottom line: Tesla rebound set to continue

Tesla shares have bounced back recently following a 30% decline from 52-week highs. The rebound looks set to continue before another major pullback occurs. TSLA is a highly volatile stock. Although its long-term future remains solid, there will be more competition that could affect valuation.