Anyone buying Tesla (NASDAQ: TSLA) stock for the first time a little over two years ago could be forgiven for thinking that its value was only going one way. Since that time, however, it’s been a rollercoaster ride.
As things stand, the share price is nearly 50% off its all-time high. Should I be regarding this as a wonderful chance to finally load up?
Expectations missed
From the outset, it’s important to put this drop in context. While no doubt frustrating for loyal holders, Tesla is still far above the 52-week low set in January of just over $100. That followed a period in which many in the market jettisoned anything vaguely tech-related from their portfolios. Galloping interest rates, supply chain issues and ongoing conflict in Ukraine were among the catalysts.
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Since then, the stock has bounced, partly due to the frenzy of excitement surrounding AI.
That said, the performance over October so far has been poor, largely due to last week’s disappointing Q3 earnings announcement. Revenue came in 3% lower than expected. The number of vehicles being delivered (a little over 435,000) was also below that forecast and 6% down on Q2.
As experienced Fools know, this is the problem with any company that trades on a high valuation — there’s always the prospect of any profits being quickly wiped out if the execution is anything but perfect.
Enter the Cybertruck
Of course, talking about past performance only gets us so far. As Foolish investors, we need to be forward-looking — just like the market itself.
So, what might get the Tesla share price moving in the right direction again?
Well, evidence of a smooth rollout of its new Cybertruck model next month will help. That’s despite Elon Musk already warning that it might take a year-and-a-half before this vehicle is a “significant positive cashflow contributor“.
I also reckon further progress in the company’s clean energy division (which includes both storage and solar) may provide a boost. After all, revenue growth here has been higher than at its auto business for the last four quarters. Surely there’s huge potential for this part of the business to expand over the next few years.
Reasons to be wary
On the flip side, one can’t ignore the possibility that the share price may continue falling if interest rates stay higher for longer. Actually, Tesla’s recent aggressive price-cutting strategy will look increasingly redundant if the Federal Reserve approves another hike on November 1.
I’m also just as wary as ever of Musk. Undoubtedly brilliant but equally divisive, I’m still to be persuaded that his purchase of X — formerly known as Twitter — is anything other than an unnecessary distraction.
Safety in numbers
If I were to snap up Tesla stock today, it would be for the long term. I simply don’t know for sure where it will go in the next few weeks or months. With so much economic uncertainty, I wouldn’t want to say we’ve seen the bottom.
Taking the above risks into account, however, I’m happy to resist buying for now and remain exposed via a number of funds (including the FTSE 100‘s very own Scottish Mortgage) rather than buy in directly.
If 2023 has reminded me of anything, it’s the benefits that come from being diversified.
