With Tesla (NASDAQ:TSLA) stock up 8% in January, and the market basically flat, legendary investor Bill Miller of the Miller Value Funds is adding to his short position in the automaker.
Miller isn’t betting on a falling market. He’s increasing his stake in Amazon (NASDAQ:AMZN), for instance.
However, on Tesla, he told CNBC: “I just don’t think it’s worth more than the top 5 automakers in the world combined.”
What Miller Sees in Tesla
Competition is increasing for Tesla in the U.S., especially in the luxury end of the market. Tesla’s share there has fallen from 79% to 65%. It could fall further, as car makers start bringing out models for the mid-market.
Even if Tesla can hold share, bears increasingly say it’s just a car company, not a tech company. Car companies have low margins and sell at a fraction of their sales. Tesla still sells at five times its estimated 2022 revenue. Car makers also advertise and may hold product at dealers for months. Yet, Tesla doesn’t do either of those things.
Then there’s China, Tesla’s largest market and the home of its biggest factory. Buyers there are upset about recent price cuts, which cut the value of their own cars while cutting into Tesla’s margins. They also have a lot of options beyond Tesla, like Nio (NYSE:NIO), XPeng (NASDAQ:XPEV), and Li Auto (NASDAQ:LI), with BYD (OTCMKTS:BYDDF) now out-selling Tesla thanks to that mid-market.
Finally, there’s Twitter, which Musk bought last year. It’s not just his policies there that are firing up critics and his more controversial public profile. It’s his use of TSLA stock to buy it, which is putting downward pressure on the stock price.
TSLA Stock: What Happens Next
Miller admits he missed Tesla on the way up. He seems determined not to miss it on the way down.
This cuts both ways, of course. Miller has been wrong about Tesla before and could be again. Tesla’s battery business and new Texas factory could keep sales flying, and bearishness could put a floor in on the stock price.
On the date of publication, Dana Blankenhorn held a long position in AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
