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Tesla (NASDAQ: TSLA) inventory continues to make lower-case fools out of Fools like me.
Again in November, I questioned whether or not it had change into a meme inventory at $320. I ended with, “I proceed to admire Tesla as a enterprise, however not the inventory at $320, which I reckon is demonstrating meme-like qualities. As such, I feel there are different extra engaging development shares for my cash“.
Since then, the share value has risen 30% and now trades at $415!
Like Elon Musk’s superhuman work schedule, Tesla shares usually defy logic. I knew that. Extra idiot me.
So, ought to I eat some humble pie and simply make investments? Let’s dig in.
Excessive multiples
Tesla shares are at the moment buying and selling at a price-to-sales (P/S) a number of of roughly 15. In different phrases, buyers are paying $15 for each $1 of Tesla’s income. The ahead price-to-earnings (P/E) ratio is round 120.
I’d be a hypocrite to pompously say that I’d by no means make investments at such ridiculous multiples. I lately took a small place in language studying agency Duolingo when the inventory was buying and selling at 20 occasions gross sales and a ahead P/E above 100.
Nevertheless, Tesla has stopped rising, not less than for now, whereas Duolingo has been rising at a 40% clip.
In fact, I’m evaluating apples to oranges right here. However my level is that it may be a very long time, if ever, earlier than Tesla returns to posting top-line development of 40%. Or the long-term 50% annual compound annual development fee (CAGR) it was projecting in early 2021.
To some extent, that’s comprehensible, as Musk beforehand admitted in late 2023: “Yeah. I imply, on the danger of stating the apparent, it’s not potential to have a compound development fee of fifty% eternally or you’ll exceed the mass of the identified universe.”
Nevertheless, Tesla is valued like a ultra-high-growth firm, which it isn’t anymore. That is why I’m reluctant to take a position.
Nevertheless it’s all concerning the robots, foolish
Musk says the corporate shall be churning out robotaxis in 2026. Then probably humanoid robots after that.
To make certain, these are mind-boggling huge market alternatives, ones which I’m enthusiastic about, regardless of the technical and regulatory hurdles that have to be surmounted. It’s arduous to not be excited after watching the Optimus Bot bartender pouring draft cocktails on the current Tesla AI occasion!
Clearly, it’s the future potential of those initiatives that varieties the premise of the corporate’s excessive valuation at the moment. Nevertheless, it leaves me questioning how a lot of that is already priced in.
To provide an reverse instance, have a look at Alphabet inventory, which trades at simply 23 occasions ahead earnings. Arguably, buyers shopping for that inventory are getting the core search, cloud, and YouTube companies, that are all nonetheless rising, then all the opposite futuristic bets bundled in without cost. That features Waymo robotaxis (already doing hundreds of driverless journeys per day), quantum computing, and extra.
Once more, Tesla is the alternative of that. It’s valued on the futuristic bets far more than the core EV and power storage companies. That doesn’t strike me as very engaging, which is why I’m going to present the inventory a swerve.
