Tesla (NASDAQ: TSLA) shares have been a great investment in recent years. As I write this in late December, the stock is up about 60% over 12 months. Meanwhile, over a five-year horizon, the TSLA share price is up more than 2,000%.
Should I buy Tesla stock for 2022? Let’s take a look at the investment case.
Is Tesla a good stock for 2022?
There are a number of things to like about Tesla heading into 2022, in my view. For starters, the company is still very much the undisputed leader in the electric vehicle (EV) market.
This market is likely to see strong growth, not only in 2022, but for years to come. Indeed, according to Fortune Business Insights, the global EV market is set to grow from around $290bn in 2021 to $1,320bn by 2028. This means Tesla has significant growth potential from here on.
Secondly, Tesla plans to open new ‘gigafactories’ in Berlin, Germany, and Texas, USA, in 2022. These should boost production numbers significantly. It’s worth noting that Tesla believes its German plant will be able to churn out EVs around three times faster than its domestic automakers can.
Third, Tesla plans to start producing its ‘Cybertruck’ in late 2022. This is set to be manufactured at its new Austin, Texas, plant. I’m not expecting meaningful sales of the Cybertruck in 2022. However, it could create some excitement around the stock.
Finally, it’s worth noting that CEO Elon Musk recently said that he’s “almost done” selling TSLA stock. Musk has been selling stock lately (more than $15bn worth) for tax reasons. This has put downward pressure on the share price.
Risks to Tesla’s share price in 2022
Having said all that, there are plenty of risks that could impact the share price next year. One major hurdle is competition from rivals. This is really heating up. In 2022, I expect Tesla to face plenty of rivalry from the likes of Ford, Volkswagen, Mercedes, Rivian, and Lucid (Lucid’s ‘Air’ has been dubbed a ‘Tesla killer’). All of these companies have recently launched slick new EVs. This could be an issue for Tesla, as some of its vehicles are now beginning to look a little dated.
Another risk is chip shortages. To date, Tesla has handled the global semiconductor shortage reasonably well. It hasn’t been impacted in the way that companies like Ford and GM have. However, the global shortage of chips does remain a risk.
Of course, there’s also the valuation. At present, analysts expect Tesla to generate earnings per share of $8.26 in 2022. At the current share price, that equates to a forward-looking P/E ratio of about 130. That seems very high to me. To my mind, a lot of the future growth here is already priced into the stock. If growth is disappointing, the stock could experience some serious volatility.
Tesla stock: my move now
Weighing everything up, I don’t see Tesla as a buy as we head towards 2022. All things considered, I think there are better growth stocks I could buy for my portfolio for next year.
