Tesla’s rapid run higher, which has seen the shares gain nearly 400% this year, has left one notable investor confused.
“I really can’t explain Tesla,” Joel Greenblatt, co-CIO at Gotham Asset Management, said Monday on CNBC’s “Squawk Box.” “I think there’s a lot of speculation in the market and I think some of it’s there. I really can’t explain it.”
Part of Tesla’s share appreciation is due to the company reporting its fourth straight quarter of profits in its quarterly report on July 22, which qualifies the electric auto maker for inclusion in the S&P 500, as well as better-than-expected second-quarter vehicle deliveries.
But more recently, much of the surge appears to have been fueled by the company announcing a 5-for-1 stock split. Tesla closed at $1,374.39 on Aug. 11 — the day it made the announcement — but now trades around $2,105, for a gain of 53% in less than two weeks. This is despite the fact that stock splits are purely cosmetic, meaning the company’s underlying fundamentals remain unchanged.
Known for his value investing framework, Greenblatt always looks at a company’s underlying fundamentals. He targets reasonably priced names that are supported by factors like growth potential and balance sheet strength.
Greenblatt said Tesla’s ascent is part of the “froth” in the market. “Because interest rates are so low … there’s nowhere to put your money, and so there’s speculative parts of the market, but you know, I think it’s more so in Tesla than it is in Apple,” he said.
Apple is another so-called story stock, but Greenblatt said that unlike Tesla, the company’s underlying fundamentals are driving its valuation.
“Apple, on the other hand, you know, has a great franchise and it’s actually getting more powerful so it’s not at a much bigger premium than the market, and it has great growth prospects, so I’m not too worried about Apple.”
The iPhone maker is currently the world’s most valuable company, and on Aug. 19 became the first publicly traded U.S. name to top the $2 trillion mark. Cupertino, California-based Apple’s valuation has doubled in just over two years.
Shares of Tesla and Apple each advanced about 3% during early trading Monday.
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Greenblatt said Tesla is part of the ‘froth’ in the market.