Elon Musk is thrilling and infuriating in equal measure, and the same could be said for Tesla (NASDAQ: TSLA) stock. Over five years, it’s up 688%. Year-to-date it’s down 55%.

I gave up on Tesla when it was showing signs of being a cult rather than an investment opportunity. I’m still wary despite the recent drop. Just because a stock has halved in value, doesn’t mean it won’t halve again.

I thought I’d hate Tesla stock

There’s so much noise around Musk (who may or may not be the world’s richest man right now) that it diverts attention from the underlying business.

For example, Musk’s Twitter takeover has battered Tesla, possibly unfairly. Musk is also spreading himself very thinly, with SpaceX, brain-chip company Neuralink and tunnelling company The Boring Company also in his in-tray. He already works 120 hours a week. Not much room to expand that.

On the other hand, he reckons his everyday input isn’t so essential, arguing that while he continues to oversee both Tesla and SpaceX, “the teams there are so good that often little is needed from me”. At least he seems able to delegate.

Two years ago, in December 2020, Tesla was valued at a staggering 966.7 times earnings. Today’s valuation is far more tempting at ‘just’ 49 times earnings. Yet it’s still expensive for a car maker, with General Motors trading at 5.6 times earnings and Volkswagen at 5.21 times. They’re shifting into the EV market too, which will increase competition for Tesla.

Yet Tesla offers investors things they never will. It’s a pioneer in artificial intelligence, electric batteries, solar panels and roof tiles, robotics, and so on. That broadens the opportunity, but also increases the risk. There will be failures as well as successes. I’m still not convinced that controversial self-driving technology will ever cut it.

China is the issue here

This year, Tesla has been caught in the wider tech sell-off as monetary conditions shift. Covid lockdowns have hit production and sales in the key Chinese market, where Tesla has been forced to cut prices, and may have to cut again. It also faces tough competition from local rival BYD, which is now the world’s biggest electric car maker (and moving into Europe). Yet Covid lockdowns have now been lifted, and sales are climbing again.

Ultimately, what happens in China is far more important than all the noise around Twitter. The company continues to post impressive revenue growth, up 55.95% in the latest quarter to $21.45bn. Full-year revenue was $74.86bn. Five years ago, it was just $10.76bn. Tesla sold a million cars last year. It has just rolled out the Semi, its 18-wheel, long-haul electric freight truck with a 500-mile range. Musk doesn’t stop.

Tesla, like Musk, divides people. It’s a case of choosing your side. You either believe or you don’t. To my surprise, I do still believe. The company has faced a heap of challenges, but has always come out ahead. At today’s reduced valuation, I think it’s a long-term buy for an investor like me who doesn’t mind a bit of risk. I have two stocks ahead of this on my buy list, and won’t have the cash to buy Tesla stock until February. I hope the recovery hasn’t started by then.

The post Tesla stock has halved this year. Here’s what I’d do appeared first on The Twelfth Magpie.

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Harvey Jones doesn't hold any of the shares mentioned in this article. 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.

It’s been a tough year for investors in Scottish Mortgage (LSE: SMT). Rising inflation as a result of supply chain issues, alongside the tragic war in Ukraine has seen the investment trust reverse some of the fine form that it’s produced in the past few years. In 2022, the Scottish Mortgage share price is down just shy of 40%. In the last 12 months, the trust has fallen nearly 45%.

It’s clear the next few months may be volatile when it comes to investing in the stock market. However, I think Scottish Mortgage shares, currently trading for well below 800p, could be a smart long-term addition to my portfolio.

The story so far

Scottish Mortgage made a name for itself back in 2020 when it rose an impressive 105% despite Covid-19 running rife on markets. However, since then, the trust’s growth has significantly slowed.

The main reason for its demise year to date is inflation. Rates have been on the rise across the globe. And as a result, markets have seen trillions wiped off their value. Inflation has at times been above 10% in both the US and the UK. And with rates showing no sign of slowing down, this could spell trouble for the Scottish Mortgage share price.

This is because during these volatile periods the worst affected assets are growth stocks, which Scottish Mortgage focuses on holding in its portfolio. Due to the volatility these stocks provide, investors tend to shy away from them during difficult times, instead switching to ‘safer’ alternatives.

Due to this, investors have been selling off their shares in the trust. With its top holdings including names such as Tesla and ASML, which are down 40% and 38% this year, it’s clear to see why Scottish Mortgage has suffered.

Is it time to buy?

Despite this, I think now may be the perfect time for me to buy the stock.

Firstly, the investment style adopted by its management team is one I can relate to. By this, I mean buying for the long hold.

Performance is measured over a five-year+ period, meaning the volatility that can be seen in the markets right now shouldn’t pose a threat. While past returns are not an indication of future performance, the last five years have seen the trust return an impressive 80%.

On top of this, I also like the diversification I get through buying Scottish Mortgage shares. As a retail investor, I get access to over 100 companies all through a single investment. For me, this is perfect.

One issue is its weighting to China. With some cracks beginning to appear in the country’s economy, this could leave the trust exposed. On top of this, as inflation rises in the months ahead, the trust may also see its price take a hit.

With this said, I’d happily open a small position in Scottish Mortgage today. Its focus on growth stocks combined with its long-term approach leads me to think I could see some healthy returns in the years ahead. I also think its weighting in China will bear fruit in the long run.

The post The Scottish Mortgage share price is below 800p! Is it time to buy? appeared first on The Twelfth Magpie.

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• As SpaceX stock plunges below its opening price, is it time to dump Scottish Mortgage shares?
• An AI beast just racked up 80-fold growth and is now a top holding in this FTSE 100 trust
• SpaceX doesn’t pay a dividend. So how come it may help these investors earn passive income?
• Scottish Mortgage shares are now even cheaper after SpaceX’s amazing stock market debut!
• Most Britons miss out on the first 20 years of investment compounding. Here’s how a Junior ISA or SIPP can change that

Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended ASML Holding. 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.

It’s been a poor year for Scottish Mortgage (LSE: SMT) shares. The investment trust has been one of the top performers over the past decade, returning a whopping 450% to shareholders within this time. However, as inflationary concerns continue to bite, the stock has fallen nearly 45% across the last year.

So, is this fall a chance to buy Scottish Mortgage shares? I believe so. Here’s why.

Delving deeper

Let’s start by taking a closer look at why Scottish Mortgage has fallen in recent times.

The main driver behind this is inflation. Rising rates have seen global markets being pushed downwards in 2022. And with rates in countries such as the UK looking like they’re unlikely to slow down anytime soon, this has seen the Scottish Mortgage share price suffer.

During tough times the worst affected assets are growth stocks, which the trust focuses on holding. Due to their volatile nature, investors tend to turn their backs on such investments, instead opting for ‘safer’ alternatives.

Scottish Mortgage’s top holdings include the likes of Tesla and ASML, which have fallen 30% and 41% this year respectively. With this in mind, it’s clear to see why the stock has seen its price drop.

Is now the time to buy?

With that said, does it open the door for me to grab some cheap shares? After all, I think the trust has plenty of positives that make it a buy.

Firstly, Scottish Mortgage’s management investment style aligns with mine. And by this, I mean buying for the long term. The managers say performance is measured over a five-year+ timeframe. Therefore the volatility we’re currently experiencing could be seen as an opportunity rather than an issue.

While past performance is no indication of future returns, the last five years have seen Scottish Mortgage return 82% to its patient shareholders, highlighting the strength of long-term investing.

What I also find attractive is the diversity this single investment offers me. Buying Scottish Mortgage shares means I get exposure to over 100 companies, including over 50 unlisted businesses. And its cheap ongoing charges of 0.32% are an added benefit.

But there are a few factors that could drag its share price down in the months ahead.

To start, inflation looks like it’s set to continue to rise for the foreseeable future. This has been the main catalyst behind the trust’s downfall, so I wouldn’t write off the stock falling further should rates continue to spike.

Scottish Mortgage also has a large weighting to China. And with the country experiencing ongoing Covid struggles alongside a property crisis, it may be a while before we begin to see the extreme growth that we’ve seen in the Chinese economy in years gone by.

I’d still buy

Despite these issues, I’d still buy Scottish Mortgage shares today and hold for the long haul. The trust has proved it can return hefty profits to shareholders. And while in the short term China may experience further issues, I think that the stock’s weighting to the world’s second-largest economy could turn out to be a winner in the future.

The post Scottish Mortgage shares are down nearly 45%: is it time to buy? appeared first on The Twelfth Magpie.

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• An AI beast just racked up 80-fold growth and is now a top holding in this FTSE 100 trust
• SpaceX doesn’t pay a dividend. So how come it may help these investors earn passive income?
• Scottish Mortgage shares are now even cheaper after SpaceX’s amazing stock market debut!
• Most Britons miss out on the first 20 years of investment compounding. Here’s how a Junior ISA or SIPP can change that

Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended ASML Holding and 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.

After its incredible 1,100% rise in 2020, NIO (NYSE: NIO) stock has hit the brakes. While 2021 saw a sharp slowdown in growth, 2022 has seen the stock pegged back by 36%. In the last 12 months, it’s down 45%.

This isn’t good news for NIO investors who, following 2020, may have thought the Chinese electric vehicle manufacturer was about to follow in the footsteps of rival Tesla.

However, now trading for above $20, will it be able to stay there and progress further?

The story in 2022

The main reason for NIO’s large fall this year is inflation. Rates have spiked globally. And as a result, many growth stocks have taken a hit. This isn’t uncommon in volatile times like these. And this is because investors look for ‘safer’ alternatives than these riskier equities. To add to this, supply chain issues and China’s zero Covid strategy have also halted production at times this year.

Despite this, the business still posted some strong results in Q1. Deliveries were up 28.5% year on year to 25,768, while vehicle sales rose nearly 25% to $1.5bn. Total revenues also grew by 24.2%. However, gross profit did fall by 6.9%.

Competition

More widely, an important factor regarding NIO stock is the heightened push to an electric world. And I see this taking one of two directions.

Firstly, it’s inevitable that more governments worldwide will expand their emphasis on a transition fuelled by renewable energy. It’s already been seen in the UK with a ban on the sale of petrol and diesel cars from 2030. And I’d expect moves like this to become common worldwide.

For NIO, this is obviously good news. With a larger push comes, hopefully, a rise in demand for its products.

However, it could also spell trouble. As the EV space continues to grow, there will naturally be a rise in competition. More established manufacturers such as Ford have already made bold all-electric commitments. Even higher-end manufacturers such as Porsche have electric vehicles available, while Ferrari has plans for 40% of its sales to be from fully-electric cars by 2030.

While NIO has seen tremendous growth in the past, this could slow as we see more of the competition targeting a slice of the lucrative market.

Despite this, NIO does have tricks up its sleeve that could keep it ahead of the curve. For example, its battery-swapping technology allows users to swap empty batteries for new ones in a matter of minutes. Should it keep producing cutting-edge technology like this, NIO may be able to keep ahead of competitors.

Where next?

So, where will NIO stock go from here?

Well, while it may be able to continue its impressive growth due to its innovative nature, I won’t be buying NIO stock today. As inflation continues to bite, I think it could slip further this year. With competition also looking like it’s going to heat up, this is of further concern for me. I’ll be keeping NIO on my watchlist for now.

The post NIO stock is above $20. Where will it go next? appeared first on The Twelfth Magpie.

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Charlie Keough 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.

This year has been dire for Scottish Mortgage (LSE: SMT) shares. After a modest 4% rise in 2021, 2022 has seen the stock come tumbling down due to inflationary pressures. Year-to-date, Scottish Mortgage fallen 32%. The last 12 months have shaved 36% off its value.

However, the trust’s investors will be delighted with the last month as the stock has risen a solid 13%. Here’s why I’d buy the trust today.

The story so far

2022 has been far from easy for the trust.

The main contributor to the downfall of Scottish Mortgage has been the performance of its top holdings. This includes the likes of Tesla and Amazon. And with these stocks down 28% and 20% year-to-date, respectively, it’s clear to see why Scottish Mortgage has suffered.

The trust has a large focus on growth stocks. And these tend to fare the worst in volatile times as people opt for ‘safer’ alternatives. As interest rates are hiked to combat inflation, investors are able to get better returns on risk-free investments. As a result, these growth stocks miss out.

However, the last month has seen the trust fight back against these pressures. A large driver behind this is the rally its top holding Moderna has made in the last couple of months. With this rise, some may be beginning to regain faith in Scottish Mortgage.

Where next?

So, after a turbulent year, where will the trust head for the rest of the year?

I’m not sure. And to be honest, I’m not that fussed. The reason for this is because I buy for the long hold. Management makes it clear that Scottish Mortgage focuses on returns over a five-year period. While past performance is no indication of future returns, the last five years have seen the stock profit shareholders with a 109% return. This easily trumps the returns of its benchmark FTSE All World Index, showing the strength of the stock.

What I also like about it is the diversity it can provide for my portfolio. Under a single investment, I’m gaining access to over 100 companies. For me, this is perfect. An added bonus is the access I get to unlisted companies, such as the exciting SpaceX. Such holdings make up over half of the trust’s portfolio.

I’m also a fan of management’s ability to pick out stocks ahead of the curve. After all, Scottish Mortgage did buy Tesla back in 2013 for $6. For all I know, it could have the next big thing already in its holdings.

The biggest threat for it is rising interest rates. These are expected to be hiked further as we head towards the end of the year. And this will only continue to dampen the performance of growth stocks.

Yet despite this, I’d still buy today. With a long-term outlook, these short-term issues don’t worry me. The trust has proven its potential over the last five years. And with the diversity it offers my portfolio, I think this fall presents an excellent opportunity to buy.

The post The Scottish Mortgage share price is on the up! Here’s why I’d buy appeared first on The Twelfth Magpie.

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• Scottish Mortgage shares are now even cheaper after SpaceX’s amazing stock market debut!
• Most Britons miss out on the first 20 years of investment compounding. Here’s how a Junior ISA or SIPP can change that

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended Amazon and 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 demand for EVs (electronic vehicles) is growing at a rapid rate. In just a few years, it has gone from a niche product to a dominant force in the automobile industry. It is estimated that EV sales will outstrip traditional cars by 2040. And to capitalise on this projected growth, I have identified the top UK shares that could power the EV revolution as possible additions to my portfolio. These two companies address a very specific problem in the industry right now, making it the perfect time for me to invest.

Why am I bullish on the EV industry?

It is clear to me that EVs are the future of the automobile industry. The top automobile manufacturers in the world have adopted the tech and are busy developing all-electric cars. And further mainstream adoption is already underway. 

Sweden is consistently ranked as the most sustainable country in the world. And the nation just witnessed record-breaking EV sales last month. EVs made up 50.1% of all automobile sales in July 2022. This was a big jump from 2021’s 37.6%. In fact, globally, June saw the highest EV sales in history with 913,479 new registrations in June, which is 54% more than a year ago. This could take global sales past 10m units next year.

And as manufacturing steps up pace to meet the demand, battery metals like lithium and copper have become highly valuable. There are some emerging mining UK shares with a focus on soft battery metals. And I think investing in these companies could boost my growth portfolio returns over the next decade.

UK shares to buy in the EV sector

Elon Musk stated earlier this year that the lack of battery-grade lithium is a major roadblock in EV production today. And Atlantic Lithium (LSE:ALL) is a company looking to address this issue.

The company owns and operated the Ewooya lithium project in Ghana. While still under exploration, the mine is estimated to hold 30.1Mt of Lithium ore. And recent drillings have found deposits much closer to the surface, which reduces the time required to reach extraction. 

Copper is another metal that batteries require. And thanks to the demand, copper prices have gone up by 125% since 2020. Taseko Mines (LSE:TKO) is a copper producer in Canada that owns and operates the Gibraltar Mines. The company produces an average of 130m pounds of copper and 2.5m pounds of molybdenum per year.

While most UK shares in this space are still under exploration, Taseko is an established business. It had its best quarter ever this year, amassing US$38m in revenue, up 61% from Q1 2021.

However, there are some big risks to consider. Mining is a cash-intensive operation and profits are highly dependent on commodity prices. Prices of these metals are currently high but could fall rapidly when demand stabilises, cutting profits.

Atlantic Lithium is yet to reach production, making it highly speculative. But I think its tie-up with Piedmont Lithium, a Nasdaq-listed mining giant, is a huge plus. Piedmont has a deal with Tesla that could make Atlantic Lithium a direct supplier to the most-recognised EV brand in the world.

Both UK shares are well-backed and fit right into the EV supply chain. And this is why I am willing to invest a £1,000 lump sum in these two companies if market performance is positive across 2022. 

The post 2 top UK shares I’m buying for the EV revolution appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan 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.

Tesla (NASDAQ: TSLA) shares have been top performers over the past decade. They’re up a monumental 16,000% over this period. And the electric vehicle manufacturer proved its quality by rising nearly 900% in a Covid-struck 2020.

Despite a 25% rise in the last 12 months, the stock has struggled this year as a combination of factors has seen millions wiped off global markets.

But after gaining some momentum in the last month, rising by over 25%, is Tesla on the road to recovery?

2022 so far

Tesla entered the year trading at $1,200 but has failed to climb above that as rising inflation has seen the growth stock suffer. With inflation rates flirting with the 10% mark in the US and UK, investors have opted to place their money in ‘safer’ value stocks, as opposed to riskier shares such as Tesla. This is not uncommon in volatile times like these. And with the business struggling earlier in the year with supply chain concerns, combined these factors have pushed down the share price.

Despite this, the last month has seen the Tesla share price surge, fuelled mainly by the strong Q2 results the business posted in late July. Total revenue for the period grew 42% year-on-year. And despite supply chain concerns, the firm managed to produce the most vehicles ever in a single month in June.

It wasn’t all good news though, as it did mention a tightening of its margins due to higher inflation and competition for components.

CEO Elon Musk has also been in the headlines this year for his ongoing attempt to take over social media platform Twitter. After initially agreeing to buy the company for $54.20 per share, Musk is now searching for ways to terminate the deal. Any future move he makes would likely impact the Tesla share price.

What I’m doing

So, does the last month’s momentum signal that I should buy Tesla shares?

I’m not too sure. One factor that drives me away is its high valuation. With a price-to-earnings ratio of 107, this shows me the stock is massively overvalued. As a potential investor, this doesn’t sit right with me.

I’m also concerned about competition. Tesla and Musk have continuously adapted and improvised, and that’s led the company to where it is today. However, as the push to an electric world inevitably becomes larger, the pioneer could see its market share dwindle. We’ve already seen many manufacturers successfully enter the space. And with global governments setting ambitious targets for an electric world, this could threaten Tesla.

The business is obviously aware of this. And as a result, has expanded its operations in Europe with a gigafactory in Berlin. It also bolstered its US capabilities with a similar operation in Texas. This will take Tesla’s production to the next level and could potentially assert its dominant market position.

With this said, I won’t be buying the shares today. If there’s a man to navigate a rocky road, it’s Musk. However, I want to see how the rest of this year plays out before purchasing. I’m tempted by Tesla, but I can see its price slipping should these tough conditions we’re facing worsen. I’ll be placing it on my watchlist for now.

The post Tesla shares are up over 25%. Here’s what I’m doing! appeared first on The Twelfth Magpie.

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Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesla and Twitter. 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 last month has seen the stock recover some of its losses, rising 8%. With the shares trading for around 815p, is now the time to buy?

A tough year

The main reason for Scottish Mortgage’s underperformance this year is due to the type of stocks it holds in its portfolio. The trust targets high-growth companies, including names such as Tesla, Nvidia, and Tencent. And with inflation rising globally, 2022 has seen these stocks suffer.

Firstly, this is because the economic uncertainty caused by inflation tends to see growth stocks take the hardest hit as investors move their money from these riskier investments to ‘safer’ value stocks.

Secondly, to combat inflation, interest rates are pushed up. With growth stocks tending to borrow big, in order to grow, this also means the debt on their balance sheet becomes tougher to pay off. Combined, this has seen the Scottish Mortgage share price suffer.

Not all bad news

Despite its struggles this year, I’m still keen on Scottish Mortgage shares.

To start, instead of looking at the dip in its price as an issue, I’m looking at it as an opportunity. The trust’s management team makes it clear that Scottish Mortgage aims to maximise returns over a five-year period. It uses the FTSE All-World Index as a benchmark for this. And safe to say, it’s outperformed this in the latest five-year stint.

As a long-term investor, this suits me. This focus nullifies any short-term headwinds. And the trust has proven this by surviving multiple crises such as the dotcom bubble and the 2008 financial crisis.

I am also drawn to Scottish Mortgage because of the diversity my portfolio receives from a single investment. The trust has a global portfolio, including unlisted shares, all for a cheap ongoing charge of 0.32%. For me, this is perfect.

One issue I see is its weighting in China. This makes up around 20% of Scottish Mortgage’s holdings. And with the country still struggling to keep a lid on Covid-19 cases, this could be an issue. We’ve seen the impact this has had so far reflected through supply chain concerns. Should this continue, this could drag the Scottish Mortgage share price down.

However, over the long term, I think its Chinese focus will bear fruit. It’s the fastest growing economy in the world. And I have full belief in the management team to pick out future winners. While it may see the trust suffer now, from a long-term perspective this doesn’t bother me.

At 815p, I’d happily snap up Scottish Mortgage shares. Its investment strategy aligns with my needs. And the diversity it offers is a great boost for my portfolio. Trading for nearly half of its 52-week high, I’d buy Scottish Mortgage now and hold for the years to come.

The post At 815p, are Scottish Mortgage shares a buy? appeared first on The Twelfth Magpie.

More reading

• As SpaceX stock plunges below its opening price, is it time to dump Scottish Mortgage shares?
• An AI beast just racked up 80-fold growth and is now a top holding in this FTSE 100 trust
• SpaceX doesn’t pay a dividend. So how come it may help these investors earn passive income?
• Scottish Mortgage shares are now even cheaper after SpaceX’s amazing stock market debut!
• Most Britons miss out on the first 20 years of investment compounding. Here’s how a Junior ISA or SIPP can change that

Charlie Keough 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.

Chinese electric vehicle manufacturer NIO (NYSE: NIO) has made a name for itself over the past few years. The business came to prominence in 2020, rising over 1,100% during this period. However, the last 12 months have been more humbling for the stock, as it has plummeted 55%.

The NIO share price dropped as low as $12 in the past year. But with it currently sat at $19, is now the time to buy?

The year so far

One reason NIO has seen a fall is because of red hot inflation. Higher rates have a bad impact on the value of future earnings. And to add to this, growth stocks, a group of which NIO is a prominent member, also take a hit during volatile periods like now. This is because investors shy away from high-risk investments in search of safer places to store their cash.

Spiking inflation also leads to higher interest rates, as central banks look for ways to control the blaze. For a stock like NIO, which borrows heavily to fuel growth, this is also bad news as this debt becomes more expensive.

More specifically, the business has also seen its operations hit by supply chain issues. As China continues to grapple with Covid, NIO has seen its production come to a halt for periods this year. This will more than likely have a negative impact on NIO’s sales figures for 2022.

Wider outlook

While the firm has faced multiple pressures year-to-date, there are other factors to consider.

One of these, which is difficult to ignore when considering buying NIO shares, is its impressive growth. 2021 saw revenues increasing 122% year-on-year. And even in 2022, despite the issues mentioned above, the business has managed to post fairly strong delivery figures. As a potential buyer, this is encouraging.

However, one issue for me is competition.

This doesn’t only apply to NIO, but to all EV manufacturers. And while I believe there are plenty of opportunities within the sector, as this space continues to grow, competition will naturally heat up.

This can be seen through established manufacturer Volkswagen, which has already made headway in the industry. While Ford has also pledged a commitment to be all-electric by the end of the decade.

As governments worldwide make larger pushes towards an electric world, this competition will only become fiercer. As a result, NIO may struggle to maintain its impressive growth. There’s little doubt this would mean its share price suffering.

With this said, NIO may sustain a competitive advantage through its battery-swapping technology. The firm describes it as a “fully-automatic battery swap in just a short coffee break,” as the technology allows users to swap out their empty battery for a fresh one in the space of minutes.

Would I buy?

NIO’s growth is incredibly impressive. And with its cutting-edge technology, it may be able to stay ahead of competitors. However, I won’t be buying the stock today. Increasing competition worries me. And with concerns surrounding the Chinese economy at the moment, I don’t think now is the time to for me to dive in.

I’ll be keeping NIO on my watchlist for now. Should its share price fall in the months ahead, I may be tempted to open a small position.

The post The NIO share price continues to fall. Should I buy? appeared first on The Twelfth Magpie.

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Charlie Keough 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.

2022 has seen the Tesla (NASDAQ: TSLA) share price falling nearly 40%. With ongoing supply chain issues derived from Covid-19, the firm has also seen rising pressure due to spiking inflation.

But despite these headwinds, last week saw the stock rebound by 10%. In fact, over the last month it has witnessed a 16% rise. So, after falling from its 52-week high of over $1,200, can it recover?

Tesla Q2 update

Earlier this month saw the release of Tesla’s Q2 production and delivery update. Within the period, the electric vehicle manufacturer produced over 258,000 vehicles, while it also managed to deliver over 254,000. This equated to a 27% increase year-on-year.

However, Q2 was the first time vehicle deliveries fell quarter-on-quarter in more than two years. The firm pinned this to “ongoing supply chain challenges and factory shutdowns,” as Tesla has struggled with production in recent months due to those Covid-19 restrictions hitting operations in China. Despite this, June 2022 was the highest vehicle-production month in the firm’s history.

Where next for Tesla?

So, where does the EV manufacturer go from here?

The slowing of production from Tesla falls in line with wider market struggles. Both the Nasdaq and S&P 500 have experienced large declines this year. And especially impacted have been growth stocks. This is because upward inflationary pressures tend to have the opposite effect on the price of these stocks. And as a result, the first half of this year has seen them come tumbling down. As investors tend to switch their money to ‘safer’ value stocks in volatile times, Tesla may continue to struggle in the near future.

Another issue I see with Tesla is its high valuation. For me, a price-to-earnings (P/E) ratio of 101 shows the stock is very overvalued. With this said, its P/E has been much higher in the past.

The business may also struggle with rising competition. There’s been a large push for a faster transition to electric vehicles in recent years. For example, in 2020 the UK government announced the sale of new petrol and diesel cars will end by 2030. And as such, I can see competition heating up in the EV space. This can already be seen with rivals such as Ford, which has pledged to be all-electric by 2030. While Tesla currently holds a dominant market position, this may slip in the future.

Despite this, I won’t write off the firm. It has taken massive strides to expand its manufacturing capacity. It recently unveiled its new Giga Texas plant. And at the same time, it has also set out plans to boost European sales with the opening of a gigafactory in Berlin. While this may cost Tesla in the short term, its ambitious expansion plans could help it retain its dominant position further down the road.

What I’m doing

The firm’s expansion should help it thrive in the long run. And its ambition has seen Tesla grow massively in recent times. However, I won’t be buying the shares today. I think macroeconomic pressures could see its price slip further. And with competition heating up, Tesla may see its role as industry leader slide.

The post The Tesla share price is rising. Here’s what I’m doing appeared first on The Twelfth Magpie.

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Charlie Keough 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.