Tesla investors may be all smiles for now, but CEO Elon Musk is warning them that the stock is overvalued

January 11, 2016 – 11:34 pm

tesla stock"The stock price that we have is more than we have any right to deserve, " he said in London Thursday at the opening of a Tesla showroom in London. And he's got a point. Shares are up 400% this year and are trading a nearly 100 times 2014 earnings estimates.

It's not the first time Musk has said that Tesla shares are flying too high, but investors haven't really bothered to pay attention. He used almost the same language about the stock's valuation during an interview with CNBC in August. But the stock has climbed 10% since then.

Musk's latest comments come just a few days after Netflix CEO Reed Hasting's note of caution about his company's stock. In a letter to shareholders that accompanied the company's earnings report, Hastings said some of the "euphoria" for the stock feels like 2003, when shares of Netflix rallied 400%. The stock plunged in 2004 and has been fairly volatile for the past decade.

This year, Netflix's stock is up a considerable 260%, making it the second best-performing stock in the S&P 500. Shares are trading at 85 times 2014 earnings estimates.

The scoop on Elon Musk's hyperloopIt's fairly rare that CEOs try to talk down their stocks, given that one of their goals is to boost shareholder value. Experts say investors should take heed.

"If the guy who runs the company and has insight is saying something, you need to read those tea leaves, " said Joe Saluzzi, co-head of equity trading at Themis Trading.

In September 1999, Steve Ballmer, who was then president of Microsoft, warned that the overvaluation of technology stocks at the time was absurd. He included Microsoft in that category. Shares of Microsoft eventually plummeted with the rest of tech after the dotcom bubble burst in 2000. (Ballmer is now Microsoft CEO, but he will be retiring at some point within the next year.)

Investors should also keep an eye on what insiders and other big investors are doing with momentum stocks, Saluzzi said. Earlier this week, billionaire Carl Icahn said he dumped more than half his stake in Netflix and booked a sweet profit.

Source: money.cnn.com

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