Traders holding Tesla (NASDAQ: TSLA) inventory had been laughing teacakes — or a minimum of mince pies — at Christmas. Shares of the electrical car (EV) pioneer had been up by a whopping 227% in two years — and 116% in simply two months!

But the wheels have come off, so to talk. As I write, the inventory is down 42% since Christmas Eve, which means a £10,000 funding made then is now value simply £5,800 on paper. Bah, humbug!

However is that this merely an opportunity to think about investing in Tesla at a large low cost? Let’s dig in to some particulars.

Fork within the street second

Tesla has been hit by a whirlwind of challenges in current months. These embrace falling gross sales, rising competitors from Chinese language rivals, CEO Elon Musk’s political antics, and margin strain. World tariffs are a brand new headache, as they might enhance the prices of imported elements, probably elevating manufacturing bills.

Yesterday (2 April), the corporate launched worse-than-expected Q1 supply numbers. Whole deliveries got here in at 336,681 whereas it produced 362,615 automobiles. That was in opposition to the corporate’s personal compiled analyst consensus for 377,590 deliveries.

This was 13% decrease than the identical interval final 12 months and 32% under This autumn 2024 figures. Worryingly, this got here even after decrease costs and financing incentives. Weak figures like this can certainly plant main seeds of doubt in traders’ minds concerning the route and valuation of the corporate.

Analyst Dan Ives of Wedbush Securities, who has lengthy been one of many greatest Tesla bulls on Wall Avenue, didn’t mince his phrases. On X, he wrote: “We are not going to look at these numbers with rose coloured glasses…they were a disaster on every metric. Refresh issues but brand crisis key. The time has come for Musk…fork in the road moment for Tesla.”

DOGE hypothesis

To be honest, Tesla did lose a number of weeks of manufacturing in all 4 of its factories in the course of the quarter because it upgraded manufacturing traces for the refreshed Mannequin Y SUV. This was the best-selling automotive mannequin worldwide final 12 months, and Musk thinks it can stays so.

Plus, the power enterprise stays sturdy. It deployed 10.4 GWh of power storage merchandise within the quarter, practically 160% increased than the 12 months earlier than.

Maybe surprisingly, the Tesla share price jumped 5.3% yesterday. However this was nothing to do with the numbers and seemingly all the pieces to do with hypothesis that Musk may quickly be accomplished together with his stint working the Division of Authorities Effectivity (DOGE). If that’s the case, that will clearly be a optimistic for shareholders as he refocuses on day-to-day operations at Tesla. 

In the meantime, Dan Ives stays bullish on Tesla’s robotaxi and autonomous car ambitions, valuing the worldwide market alternative at $1trn.

What concerning the inventory?

Even after its fall from grace, Tesla inventory is buying and selling at round 130 instances trailing earnings. On a forward-looking foundation, that a number of falls to round 100, however that’s nonetheless a hefty valuation.

For context, Nvidia‘s price-to-earnings (P/E) ratio is 36. Yet the AI chip leader is expected to grow both revenue and profits above 50% this year — Tesla most certainly isn’t.

Tesla is among the most unpredictable shares round, so I actually wouldn’t wager in opposition to it — or Musk — long run. However given the disappointing quarterly numbers right here and the sky-high valuation, I believe traders ought to tread fastidiously.