Tesla (stock ticker symbol TSLA) run by the mercurial Elon Musk closed today at $131.49 down from $400.00 just only about a year ago which as an investor makes one think whether now would be a good time to jump in and start to buy some Tesla stock.
The EV car market is no doubt increasing world wide by substantial percentage gains year over year and is a trend that is here to stay for the foreseeable future and Tesla is also no doubt the leader in this market.
However beginning last year and set to increase significantly this year and for the years to come are the number of competitors entering this market from different parts of the world.
Practically every major car manufacturer from around the world is jumping in with EV products of their own as they all have recognized this is a trend that is here to stay and eventually may make the gasoline engine obsolete.
Ford, GM, Volkswagen, Audi to name a few all have EV cars and or trucks in production and will surely all increase the models they will be offering.
Besides all the legacy vehicle manufacturers, there are a number of new entrants to the market like BYD, Vinfast, Nio and several others.
Again Tesla is still by a wide margin the leader of this market and will continue to be for sometime but the competitors will surely erode their leadership and growth going forward.
Looking at the Tesla stock another way is by their PE ratio which even now is around 40 which is after the steep decline in their price. Ford’s and GM’s PE ratio as a comparison is less than 6.
If Tesla stock was valued at the same PE ratio as Ford or GM their price would be $18.00 or $20.00 which is a far cry from their current price.
In fact Tesla’s PE ratio is about 6-7 times greater than a Ford or GM PE.
The question is even at this reduced PE does this current PE make any sense or will we continue to see the stock price of Tesla continue to fall?
Coming back to the original question of whether is now a good time to start buying Tesla stock, in the opinion of this writer the valuation of Tesla is still very rich and the competition is becoming very fierce so my advice is to hold off from buying at this point as perhaps the bloom is off this Rose.