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Tesla (NASDAQ: TSLA) inventory continues to make lower-case fools out of Fools like me.
Again in November, I questioned whether or not it had turn into a meme inventory at $320. I ended with, “I proceed to admire Tesla as a enterprise, however not the inventory at $320, which I reckon is demonstrating meme-like qualities. As such, I believe there are different extra enticing development shares for my cash“.
Since then, the share worth has risen 30% and now trades at $415!
Like Elon Musk’s superhuman work schedule, Tesla shares usually defy logic. I knew that. Extra idiot me.
So, ought to I eat some humble pie and simply make investments? Let’s dig in.
Excessive multiples
Tesla shares are at present buying and selling at a price-to-sales (P/S) a number of of roughly 15. In different phrases, buyers are paying $15 for each $1 of Tesla’s income. The ahead price-to-earnings (P/E) ratio is round 120.
I’d be a hypocrite to pompously say that I might by no means make investments at such ridiculous multiples. I not too long ago took a small place in language studying agency Duolingo when the inventory was buying and selling at 20 instances gross sales and a ahead P/E above 100.
Nevertheless, Tesla has stopped rising, at the very least for now, whereas Duolingo has been rising at a 40% clip.
After all, I’m evaluating apples to oranges right here. However my level is that it is perhaps a very long time, if ever, earlier than Tesla returns to posting top-line development of 40%. Or the long-term 50% annual compound annual development charge (CAGR) it was projecting in early 2021.
To some extent, that’s comprehensible, as Musk beforehand admitted in late 2023: “Yeah. I imply, on the threat of stating the apparent, it’s not attainable to have a compound development charge of fifty% endlessly or you’ll exceed the mass of the recognized universe.”
Nevertheless, Tesla is valued like a ultra-high-growth firm, which it isn’t anymore. Because of this I’m reluctant to take a position.
However it’s all in regards to the robots, foolish
Musk says the corporate can be churning out robotaxis in 2026. Then doubtlessly humanoid robots after that.
To make sure, these are mind-boggling huge market alternatives, ones which I’m enthusiastic about, regardless of the technical and regulatory hurdles that must be surmounted. It’s laborious to not be excited after watching the Optimus Bot bartender pouring draft cocktails on the current Tesla AI occasion!
Clearly, it’s the future potential of those initiatives that varieties the premise of the corporate’s excessive valuation at this time. Nevertheless, it leaves me questioning how a lot of that is already priced in.
To present an reverse instance, take a look at Alphabet inventory, which trades at simply 23 instances ahead earnings. Arguably, buyers shopping for that inventory are getting the core search, cloud, and YouTube companies, that are all nonetheless rising, then all the opposite futuristic bets bundled in totally free. That features Waymo robotaxis (already doing 1000’s of driverless journeys per day), quantum computing, and extra.
Once more, Tesla is the alternative of that. It’s valued on the futuristic bets far more than the core EV and power storage companies. That doesn’t strike me as very enticing, which is why I’m going to present the inventory a swerve.
