DataTrek: Tesla's (TSLA.US) fundamentals are not as solid as its valuation relies heavily on faith

According to a study by DataTrek, nearly three-quarters of the current valuations of the top 10 US stocks are based on future earnings growth expectations.

A report in DataTrek Morning Briefing said that 60% to 90% of the current valuations of large US tech stocks are based on future growth expectations, compared with about 55% for the S&P 500 index.

To illustrate the point: General Motors (GM.US) has a price-to-book ratio of 209%; Ford (F.US) 140%; S&P 500 index 45%; Tesla (TSLA.US) 9%.

This means that the shares of General Motors and Ford are trading below their current book value.

DataTrek co-founder Nicholas Colas said in the report: “The market thinks current earnings are unsustainable and that is entirely reasonable given their history. Once these companies prove they can generate meaningful profits in a weak economy, their valuations will rise.”

But for Tesla, 91% of its valuation is based on future earnings, Colas said, calling it “a faith stock, not a fundamental stock based on recent fundamentals.”

“If Tesla can demonstrate a working self-driving car and provide a specific near-term timeline for its launch, the market may assign a higher future value than it does today,” Colas said. “But if the details are vague, the stock faces the risk of another decline.”

Shares of Tesla fell more than 8 per cent on Thursday after earlier reports that the launch date for Robotaxi had been pushed back to later this year (to October).