I wonder how many people have watched Tesla (NASDAQ:TSLA) shares soaring and hoped for a price slump so they can snag a top buying opportunity?
I’m one of them, as I’m spectacularly poor at spotting the best growth stocks while they’re cheap. Well, maybe I have my chance now after the size of Tesla’s shocking price fall so far this year.
We’re looking at a slump of close to 40% since the calendar flipped over to 2025. And that would be enough to slash a £10,000 investment down to £6,000.
Big fall, bigger bounce?
There have been far bigger falls in Nasdaq tech stocks in the past. And some of the best of them went on to become multiple multibaggers in the following years. A lot of people have retired wealthy even by buying before those early falls, never mind the investors who managed to get in during the big dips.
So what should investors do about Tesla now? Normally, I’m a big believer in ignoring the hype and sidelining the personalities. And just stick to the fundamentals with my anti-distraction blinkers firmly strapped on!
The trouble is, Tesla’s future does look unbreakably tied to CEO Elon Musk right now. And he’s a very hard person to ignore.
Warren Buffett, the billionaire head of Berkshire Hathaway, emphasises the importance of top-quality management with a focus on long-term commitments. And when he has his eye on the ball, I rate Musk as among the best of them.
But his attention span sometimes seems to be, well, let’s say variable. If I owned Tesla shares, I’d probably wake up every morning wondering what new flight of imagination might have captured his fancy today.
Fundamentals
Anyway, let’s try to look past all that for now and have a squint at the fundies. The first thing that strikes me is that forecasts for 2025 still have Tesla on a big price-to-earnings (P/E) ratio of 93.
What’s the problem with that, we might ask? We’ve seen P/Es for Nasdaq stocks way over a hundred plenty of times. And a good few have still gone on to generate huge profits for investors.
That’s true, but it’s the comparisons that worry me a bit. High-flyer Nvidia, worth more than the entire FTSE 100, still has a forecast P/E of only 27. Apple and Microsoft are on equal multiples of 29.
There really does seem to be some disjoint here. Is Tesla’s electric vehicle potential really worth three times the value of the AI outlook for Nvidia? These other three could be cheap. Or Tesla could be overvalued. Or something else — the trouble is, I’m not sure what.
Market mood
Right now, it seems clear to me we’re in one of those sentiment-driven market moods. And it could take a while for cold, hard, fundamentals to win through again.
Until then, I don’t think my nerves could take the strain of risking any money on Musk. But I definitely wouldn’t write off Tesla as something that tech growth investors should consider.
