2022 has proved a brutal year so far for Tesla (NASDAQ: TSLA) shares and they’re down 45% year to date. However, over a 12-month period the shares have returned 5%, and over the past five years a whopping 747%.

So, should I be capitalising on the recent price fall and adding Tesla shares to my portfolio? Or should I steer clear of the world’s largest electric vehicle company? Let’s investigate.  

Why the stock has fallen

One of the primary reasons why Tesla stock has taken a hit over the past few months is rising inflation. US inflation reached 8.6% in May, vastly outpacing analysts’ expectations. Inflation erodes the future value of company earnings and tends to put pressure on stock valuations. This is especially true when interest rates also rise, as they have done in the last month in both the US and UK. Tesla CEO Elon Musk took to Twitter to announce he had a “super bad feeling” about the US economy, and that Tesla would have to cut its workforce by around 10% to cope. This isn’t good for the firm’s growth and has been reflected in the recent decline in the share price.

In addition to this, the firm has suffered from prolonged Covid-19-related matters. Back in 2020 and 2021, the pandemic led to huge supply bottlenecks that curtailed Tesla’s production. More recently, the lockdown in Shanghai meant that Tesla had to stop its production there, slowing production growth. Even before these shortages, demand was far outweighing the supply of vehicles, so these additional disruptions are really limiting the firm’s growth.

Unappealing valuation

Tesla shares are currently priced at $650. This is some way off of its $1,200 high reached in November 2021. However, the shares still trade on of a monstrous price to earnings (P/E) ratio of 87. For context, good value stocks usually trade under the 10 P/E mark. I don’t think the above macroeconomic and supply risks are priced into Tesla shares, which does worry me.

Reasons to be cheerful

Tesla’s most recent set of results was outstanding. In the first quarter of 2022, the company’s revenues swelled 87% year-on-year, with profits jumping over 130%. Both of these figures vastly outpaced analysts’ expectations, and the shares surged over 5% on the encouraging news. If the company can deliver more results like this, I think investors will react positively and push the stock up further.

The verdict

Although Tesla shares have fallen substantially, the lofty valuation still bothers me. I don’t think the risks facing the firm are fully reflected in the current share price. The next set of results is due for release in late July and could help bump up Tesla stock. However, it’s too uncertain a situation for me to warrant an investment. For that reason, I won’t be buying any shares today.

The post Tesla shares are down 45%: should I buy now? appeared first on The Twelfth Magpie.

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Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Tesla (NASDAQ: TSLA) shares have had a good week, up 19% over the past five days. The primary driver behind this is the new ‘gigafactory’ which has just been opened in Berlin. While this is good news in the short term, Tesla shares are still down over 16% year-to-date (although they’re up almost 60% over the past year). So, is now the right time for me to be adding the stock to my portfolio? Or should I be steering clear of the world’s biggest EV manufacturer? Let’s take a closer look.  

Reasons to be cheerful

Firstly, as mentioned, the firm has just opened a new plant in Berlin. Tesla has reportedly already hired 3,000 out of the 12,000 expected workers, so things are definitely moving in the right direction. Once the factory is at full capacity, it will be able to produce 500,000 cars annually. To put this into context, Tesla produced 930,422 cars globally in 2021, so the new factory is a huge step forward in ramping up production.

In addition to this, the firm has already been posting some excellent results. In the 2021 Q4 results, revenues reached $15.9bn, rising 71% year-on-year. A 6% rise in margins also allowed profits to rise to $4.8bn, up 118% from the same period in 2020. Tesla is also flush with over $5bn in cash and negligible debts.

Tesla shares valuation

One concern I have always had about Tesla shares is their overvaluation. The stock currently has a price-to-earnings ratio of 204. Most good-value stocks operate with P/E ratios of under 10! In addition to this, Tesla’s competitors General Motors and Toyota trade on P/E ratios of 6.5 and 9.5, respectively.

Headwinds for Tesla shares

One big risk I see for Tesla shares is the threat of rising inflation and interest rates. Both are creeping up across the globe, with the UK and US central banks both hiking rates in the last week. The problem for Tesla is that when rates rise, investors tend to pull their money out of high-growth stocks, as they can generate higher returns from safer assets. This factor could stunt the future growth of Tesla shares.

In addition to this, supply chain shortages have been causing havoc across the EV industry. These shortages have been amplified by the covid-19 pandemic. Tesla released a statement in their Q4 report explaining that “factories have been running below capacity for several quarters as supply chain became the main limiting factor, which is likely to continue through 2022”. This could be a big factor that could hold the shares back from future growth.

What I’m doing now

Overall, I think Tesla is a great company. However, in my opinion, the shares are vastly overvalued and have been since mid-2020. While I don’t think this will change anytime soon, it doesn’t mean the shares won’t continue to rise. That being said, the threats above could stunt growth. For these reasons, I won’t be adding Tesla shares to my portfolio.

The post Tesla shares are rising: should I buy now? appeared first on The Twelfth Magpie.

More reading

• I missed out on Tesla stock. So should I buy SpaceX?
• How much impact could a SpaceX merger have on the Tesla share price?

Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The share prices of both Tesla (NASDAQ: TSLA) and NIO (NYSE: NIO) have struggled over the past few months. Indeed, NIO stock has sunk around 27% over the past month and is down 57% over the past year. Tesla stock has similarly fallen over 20% in the past month yet is still up around 12% over the past year. But following these dips, should I be buying either of these EV shares.

Tesla continues to dominate the market

Tesla has managed to dominate the EV market over the past few years and is still viewed as the current market leader. This is represented in the company’s share price, which has soared nearly 1,800% in the last five years.  However, there are a few reasons why the shares have fallen recently. For example, there was the broad tech sell-off in the Nasdaq, which dragged Tesla down with it. Secondly, Elon Musk recently told investors that Tesla would not launch any new model vehicles in 2022. This was disappointing for investors, as it may mean growth slowing down.

I also worry about the competitive landscape in the current EV market, which includes new market players such as Rivian and Lucid Motors, and traditional automotive companies like Volkswagen and Toyota.

Even so, there are plenty of positives around the shares. For example, due to its market-leading position, Tesla is likely to profit from the increasing shift into electric cars. Further, largely due to cost reductions, the company has managed to increase its profit margins, and this seems likely to improve further. These positives are not quite enough to tempt be into buying Tesla stock, however.

NIO stock: is the sell-off overdone?

There have been several reasons for investor worries around NIO. For example, as a Chinese company, there are worries that the tensions between China and the US will have negative consequences. This is because Chinese regulators have recently cracked down on the country’s companies listing in the US, and at worst, this may lead to the delisting of NIO.  

Further, recent levels of inflation have also had an incredibly bad effect on growth stocks. This is due to the threat of far higher interest rates, which will make it more expensive for these companies to fund growth. NIO stock has suffered in particular as the EV maker is still unprofitable.

Despite this, there are signs that the sell-off may be overdone. For example, demand for NIO’s products continues to be strong and deliveries in January 2022 managed to reach 9,652. This is a 33.6% year-on-year rise. Recently, the company also launched the ET5, which is a mid-size premium smart saloon, with deliveries expected in September 2022. The fact that new products are being released helps differentiate NIO from Tesla and is one reason I think it’s a better buy for me.

I also like that NIO stock is a cheaper alternative to Tesla. In fact, it trades on a price-to-sales ratio of around 8. In comparison, Tesla has a far higher P/S ratio of around 16. This indicates that either Tesla is far too expensive, or NIO stock is too cheap. I think it’s a mixture of the two. Therefore, I’m very tempted to buy NIO, while I’m also willing to leave Tesla on the sidelines.

The post Tesla vs NIO stock: which EV company would I buy? appeared first on The Twelfth Magpie.

More reading

• I missed out on Tesla stock. So should I buy SpaceX?
• How much impact could a SpaceX merger have on the Tesla share price?

Stuart Blair has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

NIO (NYSE: NIO) stock and Tesla (NASDAQ: TSLA) stock have had very different experiences in 2021. Indeed, while the Tesla share price soared over 50%, NIO’s dipped around 40%. As such, can Tesla continue its excellent performance this year, or is it better to buy NIO on the dip?

Why has NIO dropped so much?

The main cause of NIO’s fall is general investor worries around Chinese stocks. In fact, due to the tensions currently going on between US and China, there’s a real risk that some Chinese stocks will have to delist from the US. This is so that American regulators can no longer access the internal documents of these companies. This has already led to the delisting of Didi from the US, just a few months after its IPO. As such, there is a real risk that NIO would also have to delist, and this could cut off a vital source of funding for the company that would potentially drive NIO’s price lower. It is a key risk to consider.

Nonetheless, NIO is still performing excellently. For example, in the third quarter, its revenue rose 116% to over $1.5bn. Although revenue growth is expected to slow to around 50% in the fourth quarter, this would still be excellent growth and a reason for me to buy the shares.

I’m also optimistic that growth will be strong for the foreseeable future. Indeed, JP Morgan analyst, Nick Lai, expects that NIO will control around 20% of the Chinese vehicle market in 2025. This should be driven by the fact that the Chinese government is attempting to boost the growth of electric vehicles (EVs), through considerable tax exemptions. This gives me optimism that NIO can continue its incredible growth. With a forward price-to-sales ratio of under 10, I may, therefore, buy some NIO stock.

What about Tesla stock?

Without worries about China, Tesla stock has been able to soar, reaching a $1bn valuation. This is mainly due to the company’s strong growth. In fact, in the Q3 trading update, revenues rose 57% year-on-year to around $14bn. Yesterday, the Tesla share price also soared over 10%, as it reported a record 308,600 deliveries in the fourth quarter. Unlike NIO, which saw a Q3 loss of $442m, Tesla has also reached profitability. This is an excellent sign for any company, and as the shift towards greener energy accelerates, I feel that profits will continue to soar.

But after its rise, Tesla stock does seem expensive. For example, it trades on a price-to-sales ratio of around 20, over twice as much as NIO. The large amount of competition in the EV sector, which is increasingly including traditional automotive companies like Toyota and Volkswagen, may also see Tesla’s market share decrease over the next few years. I feel this is making it increasingly difficult to justify Tesla’s $1bn valuation.

As such, I’m far more tempted by NIO than Tesla, as I feel that its valuation is far more reasonable. I’ll be leaving Tesla on the sidelines for now.

The post Tesla vs NIO stock: which should I buy? appeared first on The Twelfth Magpie.

More reading

• I missed out on Tesla stock. So should I buy SpaceX?
• How much impact could a SpaceX merger have on the Tesla share price?

Stuart Blair has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

In the past, most companies that have hit the $1trn mark have gone on to get much bigger. So is now the time for me to buy Tesla stock? Let’s take a look.

Tesla: the leader in the EV space

There are a number of things I like about Tesla. For starters, it’s the leader in the electric vehicle (EV) space. This market’s only going to get bigger in the years ahead due to concerns over climate change, and Tesla’s well-placed to benefit.

It’s worth noting that the recent issues with sky-high oil prices and fuel shortages is pushing more consumers towards EVs. It’s also worth noting that Tesla just received a massive order (100,000 vehicles) from car rental company Hertz.

Secondly, its self-driving technology is amazing. The technology isn’t perfect yet (last week Tesla was forced to roll back its latest software update) but it’s certainly quite advanced. If Tesla can perfect it (and that’s a big ‘if’), revenues could rocket higher.

Growth investor Cathie Wood, who has a good track record when it comes to forecasting the TSLA share price, believes there’s a 50% chance the company will achieve fully autonomous driving within five years.

Third, the company has a fantastic leader in Elon Musk. He’s a true visionary with a great track record in the technology space.

Should I buy Tesla stock now?

However, I do have some concerns about investing in Tesla stock. My main concern is the valuation. At the current share price, Tesla trades at 22 times sales. That’s high. It’s worth noting that after the recent share price rise, insiders have been selling a large amount of stock.

Indeed, last week, board member Ira Ehrenpreis sold more than $200m worth of Tesla stock after it crossed the $1,000 mark. On the same day, Antonio Gracias, a former Tesla board member whose term expired recently, also filed his planned sale of $610m worth of shares. This suggests to me these insiders see the stock as overvalued right now.

Looking at the other $1trn companies, they all have extremely dominant positions in their industries. Take Alphabet, for example. It’s the leader in online search by a wide margin (90%+ market share globally). Meanwhile, Amazon has a 40% market share in cloud computing.

Tesla is the leader in the EV space right now, however I think it’s unlikely to have a dominant market share in the future due to the fact that there are so many other players in the market. Companies like GM, Ford, Porsche, and Volkswagen are all releasing their own EVs and trying to capture market share. So, to my mind, buying Tesla stock now, above $1,000, is a risky move. 

Better stocks to buy?

Given the high valuation, I’m going to keep Tesla stock on my watchlist for now. All things considered, I think there are better growth stocks I could buy today.

The post Tesla’s share price just passed $1,000. Should I buy the stock now? appeared first on The Twelfth Magpie.

More reading

• I missed out on Tesla stock. So should I buy SpaceX?
• How much impact could a SpaceX merger have on the Tesla share price?

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Edward Sheldon owns shares of Alphabet (C shares), Amazon, and Apple. The Motley Fool UK owns shares of and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Tesla, and Volkswagen AG. The Motley Fool UK has recommended the following options: long January 2022 $1,920 calls on Amazon, long March 2023 $120 calls on Apple, short January 2022 $1,940 calls on Amazon, and short March 2023 $130 calls on Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The potential of CCIV stock

Lucid Motors is still in its infancy, yet there are already some very promising signs. For instance, the company says that it will offer the first EV with a battery range of 500 miles. It also has a faster charging time. It is hoped that this will differentiate it from its competitors.

Such promise will hopefully translate into large profits for the company in the future. I am optimistic about this. In fact, Lucid Motors’ EV reservations have recently hit 10,000, demonstrating early significant interest. Management also looks gifted, with many team members having experience at other automotive companies, such as Tesla, Volkswagen and Ferrari. This could help the company convert this initial optimism into strong revenues and profits. This is why I am very tempted by CCIV stock at the moment.

There are a number of risks with the shares, however. Firstly, Lucid Motors is yet to sell a single vehicle. This means that it is hard to estimate how many sales it will be able to complete. There are also likely to be disruptive factors, such as production issues or negative reviews. This may hinder the growth of the company. Secondly, there is also significant competition in the EV market, especially as traditional automotive companies are starting to transition. 

Why not Tesla stock?

Yet I am generally positive on the company’s prospects. Of course, many would argue that Tesla stock has a ton of potential as well. Further, due to a longer history, it could be deemed safer than CCIV stock. I don’t disagree with either of these statements. Nonetheless, I feel that Tesla has significantly less upside potential, due to its already very high valuation. 

Indeed, it currently trades on a forward price-to-earnings ratio of 137. This is huge and indicates that investors are already expecting significant growth over the next few years.

Personally, I worry that Tesla will not be able to live up to these expectations. Tesla has been able to dominate the EV market for many years, and this will become harder as other carmakers, such as Lucid Motors, gain market share. As such, Tesla’s high valuation, combined with the potential of Lucid Motors, are the reasons why I prefer CCIV stock.

The post Here’s why I prefer CCIV stock to Tesla appeared first on The Twelfth Magpie.

More reading

• I missed out on Tesla stock. So should I buy SpaceX?
• How much impact could a SpaceX merger have on the Tesla share price?

Stuart Blair has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Tesla and Volkswagen AG. The Motley Fool UK has recommended the following options: long December 2021 $130 calls on Ferrari. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.