Tesla (NASDAQ: TSLA) shares come with volatility built in as standard. If they were a car, you’d be wise to steer clear.
But Tesla stock isn’t a car. It’s been one of the most exciting and rewarding investments in the world over the last. And today it’s going cheap. Possibly.
As I write this, on Wednesday (26 February), the Tesla share price has fallen 14.42% in a week. It now trades at $302.8. If an investor had slipped £10,000 into the stock one week ago, hoping to take advantage of this year’s volatility, they’ll be looking at a £1,442 paper loss. Their £10k has shrunk to £8,558… in just five trading days.
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Elon Musk never promised us a smooth ride
Some investors will look at that and blench. Others will spy a buying opportunity. Taking advantage of the dips has been a winning strategy for Tesla investors, again and again.
History suggests Tesla could make that up in short order. The stock’s still up 51% over 12 months. Over five years, it’s up 580%. As with so many things about Tesla, my mind boggles.
Yet these are strange times for Tesla, as the world adjusts to the second Donald Trump presidency, and Musk’s role in it. Musk risks spreading his genius too thinly. Can one human body and brain take that much?
Tesla electric vehicle (EV) sales are plunging across Europe, plunging 63% in France and 60% in Germany. Some put that down to a political backlash. EV buyers also have more choice, though, as China makes plays catch up
Full-year profits plunged 53% to $7.1bn, Tesla’s worst performance since 2021. Free cash flow dropped 18% to $3.6bn.
It’s not just about EVs
Tesla’s battery energy storage business is growing much faster than the car business, as Musk previously predicted. Revenues jumped 67% with deployments up 114% to an unprecedented 11 GWh. That helped to lift the stock above $404 on 31 January. It’s lost $100 of that since. Bitcoin’s plunging too. They often move in lockstep.
Yet there’s more! There always is with Musk. There’s self-driving vehicles, robotaxis, artificial intelligence (AI), humanoid robots and other futuristic stuff to captivate investors.
Many will see the Tesla stock dip as a huge opportunity. But they shouldn’t be lured into thinking the shares are cheap. Its price-to-earnings (P/E) ratio’s still a mighty 148.55 times (although I remember when Tesla’s P/E topped 1,000).
Lately there’s been talk of a wider shift out of US shares, which look relatively pricey after their powerful run. The S&P 500‘s up just 1.25% this year, trailing the FTSE 100 that’s up 4.95%.
However, much of that talk may be premature. Betting against Tesla and the US has been a losing trade for more than a decade.
By contrast, brave contrarians may consider this a brilliant buying opportunity. They may be right. I wish them luck. I decided I’d missed out on the best part of the Tesla growth story way back, and I’m sticking with that. It’s just too risky for me. And yes, I’ll probably end up kicking myself all over again.
