Tesla Inc. (NASDAQ:TSLA) has been one of the best performing stocks in recent years. Investors focusing on companies with long-term catalysts such as those in the EV sector have flocked to companies like Tesla for outsized returns.
Tesla’s become a much more profitable company, with margins expanding and revenue soaring in recent years. This has come amid a global pandemic in which consumer spending was expected to take a hit. Increased fiscal and monetary stimulus have been broadly accommodative for the economy, and companies like Tesla have unsurprisingly flourished in this environment.
However, in recent weeks, shares of Tesla have taken a big hit. Since hitting an all-time high of $900 U.S. per share earlier this year, shares are now trading at a 25% discount to this peak. Investors appear to be worried about a number of factors on the short and medium-term horizon for the EV maker.
Among these is the concern that Tesla will be cutting its production of the model 3 for two weeks. An apparent chip shortage is the crux of the issue, and investors may be concerned about Tesla’s procurement pipeline and its ability to meet (and create) demand over the medium term. Mega-cap competitors in the auto manufacturing space have also indicated they’re "all-in" on the EV segment, so additional competition is likely to eat away at the incredible market share lead Tesla has built. Right now, this is a stock I think is far too risky, given where valuations are right now and how sensitive the stock market appears to be today.
Invest wisely, my friends.
