Tesla (NASDAQ:TSLA) has been among the most volatile EV stocks in the market. There’s no denying that. Of course, Tesla stock still holds a strong following from some, with the company largely seen as a stock with more upside than its EV peers, due to its impressive market share and historical growth metrics.
Tesla, once the market leader, had a difficult year in 2024 but saw a 30% increase in early July, resulting in a 1.2% year-to-date return. The long-term potential depends on AI initiatives and technological advancements. Many projects are still far from realization, but Tesla is valued beyond being a bestselling EV brand.
After a 34% monthly surge, Tesla stock may appear overbought, raising concerns about chasing momentum.
UBS (NYSE:UBS) recently downgraded Tesla stock to sell because of valuation issues, suggesting it might be wise to sell before potential declines. While Tesla has solid growth drivers, better entry points will probably emerge in the future.
Tesla’s Sudden Decline
Tesla shares fell about 8% after Bloomberg reported a two-month delay in the Robotaxi reveal, moving the date from Aug. 8 to October for more prototype development.
Tesla’s stock fell on Thursday after an 11-day rally, driven by strong Q2 deliveries. Declining sales from its EV lineup and tight competition in China is also signaling bad days ahead for Tesla.
Musk’s repeated promised for a robotaxis adds more frustration, as rivals like Cruise and Waymo are getting ahead of the autonomous vehicle race.
After its Q1 report disappointing investors, Musk reaffirmed that Tesla is still committed to focus on profitability on its robotaxis. He stated that skeptics of Tesla’s autonomy goals shouldn’t invest in the company.
The company’s second-quarter results are due later that month. But it’s important to note that past unveilings, like the Semi truck in 2017, showed that reveal dates often don’t indicate immediate product availability.
Valuation Is Too High
Tesla’s investment appeal has relied on future potential rather than current financials, making high valuations challenging to justify. Trading over 100-times estimated 2024 earnings, analysts predict 22% annual growth over the next few years.
However, this outlook could shift if Robotaxi or Optimus becomes monetizable soon. Investors may be wiser to wait for solid evidence rather than rely on announcements.
Despite a strong 22% annual earnings growth, a price-earnings ratio above 100 is excessive, resulting in a PEG ratio over four. This suggests investors are paying dearly for future growth.
Market sentiment may decline if Tesla’s AI advancements face delays. It might be wise to wait for a better entry point or use dollar-cost averaging to manage volatility.
Tesla Stock Remains a Sell for Me
Deliveries have been falling, declining 5% year-over-year, and Tesla’s U.S. EV market share dipped below 50%, now at 49.7%, down from 59.3%. With rising competition, continued financial erosion could lead to further stock declines.
Tesla’s robotaxi news influenced stock sentiment, but the key focus was on second-quarter earnings due July 23. Analysts expected a 2% revenue decline to over $24 billion and projected earnings of $0.61 per share, down from $0.91 last year.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.