A stark warning from a prominent investor and alarming sales data from key European markets have converged to cast a shadow over Tesla’s outlook. Michael Burry, the investor famed for predicting the 2008 housing collapse, has issued a scathing critique of the electric vehicle maker’s valuation, coinciding with reports of a dramatic downturn in European registrations.
European Demand Shows Significant Cracks
Fresh vehicle registration figures for November reveal a troubling picture for Tesla across several European nations, raising questions about demand for its core automotive business.
- In France, new Tesla registrations plummeted by 58% to just 1,593 vehicles.
- Denmark witnessed a 49% decline, with only 534 units registered.
- Norway provided a sole bright spot, recording a surge of 175% to 6,215 registrations.
However, the strong performance in Norway is insufficient to offset the severe contractions in other major markets. This erosion comes amid intensifying competition, with rivals gaining ground. The weakness is not confined to Europe; in China, Tesla’s deliveries through October fell approximately 7% year-over-year, even as competitors like Li Auto and Nio posted gains.
Burry’s Scathing Analysis of Valuation and Strategy
In his latest published commentary, Michael Burry launched a multi-pronged attack on Tesla’s financial and strategic position. He labeled the stock as “absurdly overvalued,” pointing to a price-to-earnings ratio hovering around 295.
A central pillar of his criticism focuses on shareholder dilution. Burry highlighted that Tesla dilutes its share capital by roughly 3.6% annually through stock-based compensation, absent a counteracting buyback program. For context, he notes Amazon’s dilution rate is 1.3%, while even Palantir, known for dilution, stands at 4.6%.
Burry was particularly sharp in his assessment of CEO Elon Musk’s potential compensation package, valued at up to a trillion dollars, describing it as a guarantee for further significant dilution at the expense of current shareholders. He also dismissed the company’s strategic pivot toward robotics and autonomous driving as a “narrative shift”—a distraction from its struggling primary auto operations.
Should investors sell immediately? Or is it worth buying Tesla?
Divergent Analyst Views Highlight Extreme Uncertainty
The investment community appears deeply divided on Tesla’s trajectory, reflecting the clash between its futuristic ambitions and present-day challenges.
On one side, Stephen Gengaro of Stifel presents a bullish case, raising his price target from $483 to $508 and reiterating a Buy recommendation. His valuation employs a sum-of-the-parts model that assigns $186 per share to the Full Self-Driving software alone and an additional $158 to the prospective robotaxi business. Gengaro projects a robotaxi service launch in major metropolitan areas by the end of 2025.
This optimistic vision confronts a stark financial reality. Tesla’s operating margin contracted to 5.8% in the third quarter, down from 10.8% a year prior. Aggressive price cuts have eroded profitability without generating proportionate volume growth. With a market capitalization of $1.42 trillion, the company’s valuation appears to price in flawless execution of all its future projects, leaving shares vulnerable to any disappointment.
This polarization is evident in price targets: while UBS considers $215 a fair value, Stifel’s target exceeds $500.
A Critical Juncture for the EV Pioneer
The coming weeks are pivotal. Tesla requires an exceptionally strong December performance to compensate for November’s softness and meet quarterly objectives. Additionally, the market is awaiting the broader rollout of FSD version 14.1.7, with proponents hoping for a transformative breakthrough in autonomous driving technology.
The gap between the promising “AI and robotaxi” narrative and the sobering sales figures from the core auto business continues to widen. Michael Burry’s alarm may prove a precursor to a painful market reassessment—or merely a premature critique if Tesla can indeed deliver on its most ambitious technological promises.
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