It is hard to shake off Tesla Inc. fans. The EV maker is set to come out with its worst-ever first-half results with a 35% stock price plunge that has even eclipsed the S&P 500 index’s 20% decline. But instead of the selloff dimming, investors and analysts feel they use buying opportunity after a $350 billion wipeout in market value.
The Opportunity for Investors
Blanked Schein Wealth Management Chief Investment Officer Robert Schein says that while the price of Tesla stock was perfect six months ago, it now looks like an attractive entry point for long-term investors.
As per Bloomberg News, the company has been facing soaring raw material costs and struggling with supply chain shortages. There is also a specter of the global economy slowing, which can trouble companies like Tesla, which require growth.
Gene Munster, the managing partner of VC firm Loup Ventures, says that Tesla is not immune to the happenings in the macro-environment.
However, Musk’s highly publicized buyout of Twitter Inc. has added a wrinkle to the situation at Tesla. Since the announcement by Musk on April 4 that he has a 9.2% stake in Twitter and is the largest shareholder, the stock is down 37%. Later, Musk agreed to acquire Twitter at $54.20 a share, but since then, the two sides have been haggling over issues.
Investors are worried that Twitter’s bid has been distracting Musk as the price of Tesla is now less than $700. However, Schein is confident that the stock will touch $1000 in the next 12 months as the supply chain ease, the company’s balance sheet improves, and the Musk Twitter saga comes to a close one way or another.
Despite all the issues, Tesla’s stock price is higher than traditional automakers. Ford Motor fell 45% and General Motors down 43% in 2022. Tesla shares trade at a price-earnings multiple of 59 times, compared to GM and Ford at 6 times. As Tesla continues to lead in manufacturing and selling EVs, it will continue to demand a higher market share.
Munster says long-term investors are attracted to Tesla beyond the EVs. The company is exposed to new technologies, including Optimus Robot and solar roof tiles. Munster says Optimus has a 10% chance to succeed, but it will be significant if it does. Also, GM and Ford are not doing similar stuff.
Investing in Tesla is not for everyone, though, given its volatility. And in the short term, at least, the turbulence is to stay, especially when global recession fears weigh on the consumers.
The production in the last quarter was severely disrupted due to covid-related shutdowns in China. It will add to the tumult when Tesla declares its second Quarter delivery numbers later this week. Average analysts estimate at Wall Street is an 18% decline in delivery numbers since March-end.
