Tesla (NASDAQ: TSLA) is probably the most unpredictable stock in the world. You just can’t foresee what it’s going to do next.
Take the last six months, for example. In this time, the electric vehicle (EV) pioneer has seen its margins squeezed amid an industry slowdown and ferocious competition from Chinese rivals. And the recent robotaxi event was widely seen as underwhelming.
Meanwhile, CEO Elon Musk has been busy campaigning for Donald Trump, which some have seen as yet another distraction from his day job(s).
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Given all this, you might have assumed the share price would be in the doldrums. But it’s not. It’s up 35% in just the last six months, and 1,153% over five years.
This means a five grand investment made half a year ago would now be worth around £6,750. That’s a market-thrashing return.
Short sellers are getting burnt (again)
I didn’t expect the stock to perform so well, especially as it was already highly valued. But I’d never bet against Tesla stock (assuming I was a short seller, which I’m not). History suggests that would be unwise.
Yet it appears some short sellers — those who borrow and sell a stock they believe will decline in price, aiming to buy it back later at a lower price — still haven’t learned. According to data cited by Yahoo Finance, they lost $4.2bn in the two days following the firm’s recent Q3 earnings release.
This report sent the stock up 22% in one day (its biggest rise in over a decade), then another 3.3% the next day.
Q3 earnings
Again, based on this massive share price surge, you’d assume Tesla’s earnings were mind-boggling incredible. Nvidia-esque, even. But revenue of $25.2bn was lower than the $25.4bn expected by Wall Street (though 8% higher than Q3 2023). Deliveries also missed expectations.
The company did beat on the bottom line, with earnings per share of $0.72 easily surpassing the $0.58 anticipated by analysts. And the gross margin also beat forecasts.
But the excitement was generated by Musk’s commentary on the future. He said vehicle sales would grow by as much as 30% next year. And there’ll be a new, sub-$30,000 model to freshen up the ageing lineup.
Would I buy Tesla stock?
That’s a very high bar set now for next year. The 30% figure is more than double what most of Wall Street had pencilled in. If sales come in much lower than that, the stock could get crushed. Then again, taking us back to the beginning, I wouldn’t bet on that.
What I do know is that the stock is priced for absolute perfection at 78 times forward earnings. The last time I bought a stock on that sort of multiple — it was Shopify, back in mid-2020 — it didn’t work out too well for me.
More broadly, Tesla is valued as a robotics and AI company, which is fair enough given the high-tech projects it’s working on. Musk said Tesla’s humanoid robot lab looks like something out of the drama Westworld.
Yet I have to imagine the robotaxis are years away, given the regulatory hurdles still ahead. And with the stock already highly valued, I’m going to invest my money elsewhere.
