Michael Burry, the celebrated investor whose foresight during the 2008 financial crisis was immortalised in the film The Big Short, has launched a fresh critique of electric vehicle giant Tesla. In a recent newsletter, he labelled the company as "ridiculously overvalued", casting doubt on its sky-high market capitalisation.
Burry's Bearish Stance on Tesla and Tech
In his Substack publication, 'Cassandra Unchained', on Sunday, Burry did not mince words. "Tesla's market capitalization is ridiculously overvalued today and has been for a good long time," he wrote. This criticism follows closely on the heels of his expressed concerns about the current artificial intelligence (AI) investment boom, suggesting a broader scepticism towards high-flying technology sectors.
Burry supported his argument with a stark valuation comparison. As of the last market close, Tesla's stock traded at approximately 209 times its forward earnings. This figure dramatically overshadows the company's own five-year average of 94 and dwarfs the S&P 500's average forward price-to-earnings ratio of around 22, according to LSEG data.
A History of Short Positions and Recent Criticisms
This is not Burry's first foray against Tesla. His firm, Scion Asset Management, placed a significant bearish bet against the automaker in May 2021, though he later clarified to CNBC by October 2021 that it was merely a closed trade. The famed investor, portrayed by Christian Bale on screen, has built a reputation for identifying market bubbles.
His latest newsletter continues this trend, with Burry also stepping up criticism of other technology heavyweights. He has questioned the cloud infrastructure boom and accused major providers like Nvidia and Palantir Technologies of using aggressive accounting to inflate profits from massive hardware investments.
Burry launched 'Cassandra Unchained' in November after closing his hedge fund and returning capital to investors, stating the paid newsletter now has his "full attention".
Context: Shareholder Support for Musk's Pay Package
Burry's sharp critique arrives just after Tesla shareholders reaffirmed their confidence in CEO Elon Musk. Investors recently approved a monumental pay package that could see Musk, already the world's wealthiest individual, receive up to $1 trillion in stock over the next decade, contingent on the company hitting an ambitious series of performance milestones.
Tesla did not provide an immediate comment to Reuters regarding Burry's latest statements. As markets digest these warnings from one of finance's most notable contrarians, investors are left to weigh the soaring valuations of tech leaders against the fundamentals.
