Over the previous yr, Tesla (NASDAQ: TSLA) has doubled in worth. However whereas that 100% development is unbelievable, has the tide turned? Tesla inventory has crashed 22% from the place it stood barely every week earlier than Christmas.

For a corporation with a market capitalisation north of a trillion {dollars} (nonetheless), that could be a large fall. Is that this a shopping for alternative for me, or simply the beginning of a speedy downhill street for Tesla inventory?

What to take a look at right here

I have no idea the place the share will go from right here. No one does. However fairly just a few issues are making me nervous proper now about whether or not the enterprise deserves that valuation (or something prefer it).

First is the corporate’s automotive enterprise. After years of sturdy development, gross sales volumes final yr declined (albeit solely barely).

However the market general continues to be rising. Tesla is more and more being outpaced by rivals comparable to BYD. So whereas the corporate’s complete revenues grew final yr (and are substantial) that development was small.

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Even when the automotive enterprise ought to plateau – or sees gross sales falling this yr, which is a threat given rising competitors – Tesla has a couple of string to its bow.

It has used its power storage experience to construct a enterprise in that subject. It’s increasing quickly and I see sturdy additional development alternatives.

However certainly the latest Tesla inventory price can’t be justified simply by the automotive enterprise and power storage alternative? I feel Wall Avenue has been factoring in a giant premium for the potential dangled by two issues: self-driving taxis and robotics.

A tricky surroundings and getting harder

Tesla has good alternatives in each areas. However so do a number of rivals. Alphabet subsidiary Waymo is already pulling forward of Tesla in rolling out self-driving taxis.

In any case, the enterprise mannequin for that market stays to be seen. Whether it is too crowded, gamers could compete on price and switch self-driving taxis right into a cash pit not a cash maker. Uber is worthwhile now, however for a very long time it burnt money like no one’s enterprise.  

In robotics too, Tesla is eyeing a crowded subject. Not solely does the enterprise mannequin stay to be confirmed however I’m unclear that Tesla has a novel aggressive benefit to set it aside from different robotics producers.

Issues might worsen

If we ignore valuation for a second, I see loads to love about Tesla. Whereas the automotive enterprise seems like it could be working out of steam for now, it’s nonetheless big and easily sustaining present gross sales must be sufficient to make critical cash.

The power storage enterprise is rising properly and Tesla has sturdy experience. Different ventures comparable to self-driving taxis could be seen as potential development drivers.

As an investor although, I can not merely ignore valuation. Tesla inventory is promoting on a price-to-earnings ratio of 184, which strikes me as very costly. Positive, it has lengthy appeared costly.

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However having been costly up to now doesn’t imply that being costly now equals an affordable price.

Development prospects in Tesla’s automotive enterprise look worse than beforehand. Different ventures like self-driving taxis are fascinating alternatives at this level, however not confirmed companies.

I feel Tesla inventory seems badly overvalued and don’t have any plans to purchase.