Down by 22% in little over every week, Tesla (NASDAQ:TSLA) generally appears to be behaving extra like a penny share than an organization price nearly $900bn that final yr had a income near $100bn. Nonetheless, I’ve been eyeing Tesla inventory as a doable addition to my portfolio for some time already – so might this newest crash supply me the type of shopping for alternative I’ve been hoping for?
What I like about Tesla
My reply is dependent upon the value, one thing I’ll get into under. First, although, I ought to clarify why I like the thought of proudly owning some Tesla inventory in any respect.
The corporate is barely greater than twenty years previous. However it has already constructed up a large international manufacturing and gross sales footprint for its electrical automobiles. Gross sales volumes declined barely final yr (and that decline has accelerated this yr), however stay substantial.
I feel Tesla’s latest historical past factors to 2 essential elements.
First, it’s a critical contender within the electrical car house. That could be a aggressive space and Tesla dangers rivals like BYD leaving it behind, nevertheless it has strengths similar to proprietary expertise, a vertically built-in enterprise mannequin and distinctive designs.
A second level additionally jumps out at me from Tesla’s growth. It has demonstrated experience not solely in imagining new merchandise, however in bringing them to market at scale and rapidly. It’s doing the identical now with its energy storage division, which, in contrast to the automobile enterprise, had a really sturdy first quarter.
Such experience might assist Tesla capitalize on a number of the different concepts that sit someplace between its drafting board and widespread actual world use, from automated taxi fleets to robotics.
The Tesla share worth isn’t so likeable!
That issues as a result of, seen purely as a automobile firm, Tesla inventory would look wildly overvalued to me.
So far as I’m involved, the one doable justification for the present valuation, not to mention a better one, is the potential of the corporate’s plans past the electrical automobile enterprise.
That, nevertheless, is the place I begin to have critical considerations about valuation, even after the latest crash in Tesla inventory.
Whereas the ability storage enterprise is rising rapidly, even taken along with the automobile enterprise I don’t suppose the joint valuation must be anyplace near $900bn.
In the meantime, the opposite concepts are extremely speculative for now – it stays to be seen when they’re commercialized at scale, in the event that they ever are. So I feel it’s arduous to justify something greater than a reasonably modest valuation for them at this level, regardless of how giant the long-term potential might appear to be.
Taken because the sum of the elements, I don’t suppose Tesla is price something like its market capitalization. So, though the share is cheaper than a few weeks again, it’s nonetheless far too costly for me to contemplate shopping for but.
