Tesla may be an investor favorite for exposure to the electric vehicle industry, but fund manager Jordan Cvetanovski has another way to play the booming sector. The Texas-based EV behemoth has reaped the benefits of its early leadership, with the stock price rallying around 45% last year — sending the company into the exclusive $1 trillion market cap club prior to this year’s market rout. To be sure, Tesla’s valuation has taken a significant hit this year, with a 30% drop in its stock price amid the broader rout. But half of the analysts covering the stock still have buy ratings on Tesla, according to FactSet. Cvetanovski, who is chief investment officer and portfolio manager of Pella Funds Management, is not piling into the stock just yet — despite Tesla’s share price plunging nearly 40% from its 52-week high as at May. 17. “It’s one of those stocks that kind of divide the room a little bit at this stage and I don’t want to say I fall into a certain camp. What I ultimately focus on is valuation,” Cvetanovski told CNBC Pro Talks. Love him or hate him, Elon Musk has played a key role in disrupting the fossil fuel driven auto industry, with traditional automakers now investing heavily in producing EVs to catch up to Tesla’s leading position. Read more Bank of America says it’s time to buy this electric vehicle stock as sales improve General Motors is a buy as its transition to electric vehicles gains steam, Berenberg says Analysts call Tesla a ‘must own’ and ‘core holding’ following blowout first-quarter earnings “Back when [Tesla] was a $50 billion company, everyone doubted. All the car manufacturers didn’t think this would happen, and now they’re piling into EVs. So, whatever we say about Tesla now as a stock, it doesn’t mean that they haven’t achieved wonderful things and that they haven’t innovated and done excellent things,” Cvetanovski said. “Having said all this, we have to just think about investing. We can’t invest with our hearts too much. We have to combine it with some kind of discipline and for us, valuation is very important,” he added. An alternative pick Cvetanovski noted that German automaker BMW currently produces about 2.5 million vehicles a year and is valued at around $50 billion. In contrast, Tesla currently produces about 1 million vehicles annually, but has a market cap of nearly $1 trillion, he added. “BMW– You can buy the whole company, all its history, all its manufacturing progress and capability for around $50 billion…. For $1 trillion, I can buy 20 BMW companies,” Cvetanovski said. Just last month, BMW introduced its newest electric vehicle — the i7 — a battery-powered take on the brand’s most expensive and luxurious 7-series sedan. BMW’s stable of EVs also include the i3 and i4, though the rollout has been held up by supply chain problems. The automaker aims to have two million EVs on the roads by 2025, and estimates half of its car sales to comprise EVs by 2030. Don’t see Tesla as being dominant While Cvetanovski acknowledged that Tesla has a more aggressive production target relative to BMW, he raised doubts about Tesla’s ability to retain its current market share. He believes that while the electric vehicle is a complex system, it ultimately has “much fewer” moving parts compared to the internal combustion engine. Tesla’s software also isn’t at the level where the company has a “10-year lead,” he added. “I just don’t see Tesla being as dominant, but that’s just our view. And for you to buy Tesla now, you have to really believe [it as being dominant],” Cvetanovski said. “We don’t want to have to believe anything that’s somewhat unprecedented in that industry, so there’s easier ways to play and cheaper ways to play [the EV trend].”
Tesla may be an investor favorite for exposure to the electric vehicle industry, but fund manager Jordan Cvetanovski has another way to play the booming sector.