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Tesla Motors Inc. (TSLA): Aswath Damodaran was Wrong

There is no doubt that Tesla Motors Inc. (NASDAQ:TSLA) is a revolutionary auto company but overvaluation sentiments by CEO, Elon Musk, have only  come to haunt the company in the recent past. Musk might have been right on his overvaluation sentiments when the stock was trading at the highs of $291, but not New York University Professor Aswath Damodaran.

Tesla Motors Inc (NASDAQ:TSLA)

During an interview on Fox Business September last year, Damodaran suggested that Tesla fair value at the time was $70 when the stock was trading at the lows of $163.

“I have a pretty optimistic view about the company. It will get as large as Audi in terms of revenue about $65 billion and have the margins of a Porsche that is way-up there. The value I get is about $70,” said Mr. Damodaran.


At the time, Damodaran argued that Tesla Motors Inc. (NASDAQ:TSLA) was a momentum stock whose pricing was driven by people talking to each other consequently pushing prices up. There is no doubt that Damodaran was wrong at the time as Tesla soared to highs of $291.42 as of September’14 this year.

The New York University professor at the time also emphasized that it would take Tesla approximately ten years, to come close to Audi’s and Porsche revenue margins.

Mr. Damodaran is at it again, this time around he is predicting about much hype around GoPro Inc. (NASDAQ:GPRO) as well as Twitter Inc. (NYSE:TWTR) that he believes are overvalued. During an interview on CNBC took issue with GoPro being priced as a social media company in terms of multiples of revenue and margins that are built into the price.

Mr. Damodaran argues that GoPro Inc. (NASDAQ:GPRO) might have the potential to scale the industry but not the way people are expecting.

“This is a stock where mood and momentum is what is driving the stock and that pricing game is completely out of your control. So even if you believe that GoPro is overvalued don’t go crazy and sell short because that’s recipe for disaster,” said Mr. Damodaran.

The professor also maintains that Twitter might have stagnated after going public when compared to Facebook Inc. (NASDAQ:FB) whose earnings have evolved over the years. Damodaran remains pessimistic about Twitter’s credentials especially on the ongoing crowding of the space.

Damodaran has also taken a swipe of Twitter Inc. (NYSE:TWTR)’s current trading margins of $40 arguing that the stock might be overvalued. The professor believes the management has not found a way to monetize the huge user base at its disposal, which is key to future success.

Having failed once on the valuation of Tesla Motors Inc. (NASDAQ:TSLA), which has since soared to highs of $291. It awaits to be seen how investors will react to Damodaran’s valuation call for Twitter Inc. (NYSE:TWTR) and GoPro Inc. (NASDAQ:GPRO) that are commanding positive sentiments in the market.

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