When I hear a YouTube personality telling me they’ve invested a lot in Tesla (NASDAQ:TSLA) stock, my nerves twitch a bit.
Especially when it’s on a channel that’s got nothing to with finance, and it’s someone who seems to like a bit of risk.
When a stock like electric vehicle (EV) maker Tesla is soaring, it needs one thing for the climb to keep going. It needs more people prepared to pay more for it. And after all the YouTube followers, who’s left?
Second wind?
From over $400 in 2021, Tesla stock has lost 58% to around $175 as I write. It fell even lower in early 2023, and the recovery since then looks to be running out of steam.
Times like this can be good times to buy a fallen growth stock. So why won’t I buy Tesla?
Well, first, let’s have a quick look at the good stuff.
For one thing, while many investors might see Tesla as overpriced, I reckon the stock valuation actually looks quite reasonable.
High valuation?
Sure, we’re looking at a forecast price-to-earnings (P/E) ratio for the current year of over 65. And that’s in a year when we expect a dip in earnings per share (EPS).
We can’t have a growth share with falling earnings, can we? Well, yes, it happens. And it can give us a new chance to buy.
The whole EV market faces a tough year. Weak global economies, high interest rates, pockets being squeezed… do not make for a boost in upmarket spending.
But with EPS growth set to return strongly in 2025 if forecasts are right, the P/E could be down to around 35 by 2026. I think that could be a bargain for the world’s leading EV stock.
Tech leader
Tesla has a wide infrastructure network. And it’s the brains behind a lot of the technology that other EV makers are happy to pay for.
Batteries and charging stations, for example, are both areas where Tesla seems to be ahead by leaps and bounds.
But, I say ‘seems to be’ with caution there. I know very little of the technology itself, so I’m guided more by headlines than anything else.
Ready for change?
And one thing I do know about technology is that it has a habit of changing, sometimes very quickly.
I was just reading about sodium ion batteries. They’re similar to lithium ion ones, it seems. At the moment, though, they can’t hold anywhere near the charge of lithium batteries.
But sodium is vastly more abundant. The oceans are full of it, for one thing. So there’s a huge incentive to get it working better.
Ignorance
It all comes down to the fact that I just don’t understand the technology well enough. What might be round the corner? Who will come up with it? Not a clue.
Investing in things I don’t understand, which could change rapidly, is just not good for my nerves. Even if I might miss out on a good thing — which Tesla might be right now.
