US Market

Why I’m Loading Up On Tesla Stock $TSLA

Calvin Lo

Tesla (TSLA) stock has been back on a downtrend since the head fake in late March/early April in line with the broader market sell-off. TSLA last closed ~$734 which is around -41% off its 52-week high hit back in Nov 2021.

Technicals

TSLA has dipped below the most previous support of ~$765, which was in mid-March prior to the last bounce. In the short term, I think there’s more pain ahead especially since US inflation is still running hot at 8.3% so investors are worried the Fed might lean towards more aggressive rate hikes.

According to Yahoo Finance, TSLA has a 5Y monthly Beta of 2.08, which means that we can expect TSLA stock to move twice as much in magnitude compared to the rest of the market. If you’re a TSLA shareholder, you might be feeling this acutely since TSLA will have roughly declined twice as much as the market.

Fundamentals

Tesla’s financials have been growing from strength to strength every quarter. Revenue growth is still healthy despite supply chain issues. Tesla now has strong FCF, good margins/profits, nice cash cushion, and overwhelming demand for their products.

Tesla has recently opened 2 new Gigafactories in Texas and Berlin and are now ramping up production. This is offset somewhat by lockdowns in Shanghai affecting production volumes and exports there. In the medium term though, Tesla should have no problem increasing production substantially again this year.

On the side, Tesla seems to also be making good progress on FSD and the energy business. Another interesting project to watch is the humanoid robot. Not forgetting also the Cybertruck and Semi in the pipeline, although delayed many times.

I’ve also just updated my investment thesis on Tesla here.

Weak macro environment

The overall macro environment is still very weak and investor sentiment getting increasingly bearish/fearful due primarily to inflation and fears of recession. In addition, supply chain issues aren’t resolved yet, Russia-Ukraine is still ongoing, and the Fed doesn’t appear to be in control.

My gut feel is that we might still have a long way down to go until we get a reversal, especially for growth stocks like TSLA. During times of FUD, the whole market gets dragged down and valuations compress. TSLA is unlikely to be spared.

Why I’m still buying

However, I see this as an opportune time to start loading up on TSLA for the long term. Prices have come down far enough to make it interesting, although arguably TSLA might still be overvalued currently. Technicals seem weak, but fundamentals are stronger than ever.

Personally I do think that based on this year and even next year’s estimates, TSLA does still seem to be overvalued. TSLA is currently trading at 15.8x P/S and 72x forward P/E, not cheap especially in this market environment.

When I’m looking at TSLA stock though, I’m looking at where the company Tesla could be 5, 10, 20 years down the road. Tesla is riding the electrification trend (arguably one of the main driving forces), including electric vehicles, battery tech, and are even going into other secular growth areas like AI and robotics. In this regard, it’s hard to find another company with a future as promising as Tesla, provided they execute of course.

Admittedly though, I’ve been a bit trigger-happy when it comes to buying shares and I’m usually buying in too early (as you can see from my trades below). So I’m definitely not saying you should buy now, just sharing my trades and thought process.

I’m always reminding myself not to go too crazy, to wait, and to just average in. I’m still holding a healthy amount of cash in anticipation of further declines.

Most of my TSLA shares are in my Personal portfolio. I only have a handful in our Family portfolio, where risk management is more of concern. You can see my portfolio details here.

If TSLA stock continues to decline, I’ll probably continue to buy slowly. I’m looking at around $550-$600 to really go in heavy if it gets there. It will be painful, but that’s the silver lining of low prices if you’re focused on the long term.

Disclosure: I’m long TSLA, if it wasn’t obvious enough.

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Disclaimer: This is not financial advice. I am not professional financial advisor nor do I work in the finance industry. Anything I write here is purely my personal opinion. Please do your own research and due diligence before investing into anything. All investments come with associated risks. Best to consult a financial advisor if you’re still unsure.

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