Tesla short-seller names 2 auto stocks to own — giving them 100% upside

Published Wed, Apr 3 20247:10 PM EDT

A Tesla short-seller named two auto stocks that he believes have the potential to deliver 100% upside for investors. Per Lekander, managing partner at investment management firm Clean Energy Transition , is bullish on Mercedes Benz and Stellantis despite the challenges faced by these companies in the electric vehicle (EV) market. Lekander, who holds a short position in Tesla shares, has said the EV carmaker could "go bust" while its stock could fall to $14. Short-sellers profit when shares fall. His comments came after Tesla reported 386,810 vehicle deliveries in the first quarter, significantly below the lowest market estimates . "This was really the beginning of the end of the Tesla bubble, which probably, arguably was the biggest stock market bubble in modern history," Lekander told CNBC's "Squawk Box Europe" Wednesday. Lekander's firm manages nearly $3 billion in assets and successfully called a 2018 rally in carbon prices. The hedge fund manager said that the Tesla bubble had created what he called an "anti-bubble" in the auto sector, causing investors to be overly bearish on companies that are actually performing well. He pointed out that Stellantis , which owns Alfa Romeo, Chrysler, Dodge, Fiat, Jeep and more, has delivered nearly 100% total return in the last two years, with 30% coming from dividends. Mercedes has also performed well, albeit to a lesser extent, with 35% total returns. In comparison, Tesla's value has halved over the same period. STLA TSLA line 2022-04-03 Despite their strong performance, both Stellantis and Mercedes are trading at about six times forward price-to-earnings ratio (P/E), which Lekander believes is a significant undervaluation. Meanwhile, Tesla continues to be valued at nearly 60 times next year's earnings. He attributed this to the unreasonably rosy expectations surrounding Tesla and the EV market, which has led to a pessimistic outlook for traditional automakers. Stellantis is due to report its first-quarter total sales on April 30. Tesla will report earnings on April 23. Valuing AI in auto Lekander also dismissed the notion that Tesla's self-driving software justifies its high valuation, noting that the product is still in early research and development. In fact, he pointed out that Mercedes is one of the only automakers to have partnered with Nvidia, an AI chipmaker, to make " software-defined vehicles " in the near future. "I thus remain massively bullish quality auto stocks, Stellantis and Mercedes are my favourites as they are well run and fully investor owned," Lekander told CNBC via email. He believes that if these companies were valued on similar terms to other large manufacturers, shares of Stellantis and Mercedes could double from current levels. "If I compare to other industrials companies with similar margins, cyclicality and balance sheets Stellantis should be a 10x PE stock and Mercedes more like 15x implying that they still have at least 100% upside from here," Lekander said. — CNBC's Arjun Kharpal contributed to this report.