Tesla share: Expert sees attractive entry point for long-term investors

shares in this article

• Tesla stock with strong minus in the first half year
• Experts see long-term potential for Tesla shares
• Low valuation as a good entry point?

The electric car maker Tesla recently published its delivery figures for the second quarter and had to report a decline compared to the first quarter of 2022. Due to the plant closures in Shanghai caused by the Chinese Corona policy and “challenges in the supply chain”, only 254,695 electric cars were handed over to customers in the past quarter. Rising raw material costs, slowing economic growth and high inflation are also likely to be problems for Tesla. For example, high inflation rates mean that households have less money to spend on luxury goods like Tesla electric cars, as they have to spend more on food and energy. “Tesla is not immune to everything that’s going on in the macro,” market expert Gene Munster said, according to Bloomberg. This is also clearly reflected in the Tesla share price: In the first half of the year, the NASDAQ-listed paper lost around 35 percent in value and lost around 350 billion US dollars in market capitalization. That shouldn’t deter long-term investors, however. Rather, you should view the decline as a good buying opportunity for Tesla stock, experts say.

Exposure to Tesla stock as a long-term bet

Just a few weeks ago, Garrett Nelson, Vice President and equity analyst at CFRA, described the price decline in Tesla shares as a “generational opportunity for investors” with reference to the long-term business prospects. Now, Robert Schein, CIO at Blanke Schein Wealth Management, is another expert who shares this view. “Six months ago Tesla was rated for perfection, but now it looks like a very attractive entry point for long-term investors,” Schein told Bloomberg. He is confident that Tesla stock will approach the $1,000 level again within the next 12 months. The paper was last this high in April, with Tesla shares last closing at $699.20 (closing price on July 5, 2022).

Schein justified his optimism by saying that the problems in the supply chains should ease in the coming months and that Tesla will continue to improve its balance sheet. At the last official balance sheet presentation, Tesla had convinced with a strong increase in sales and profits, the profit margin was a good 19 percent. According to industry expert Ferdinand Dudenhöffer, Tesla was the world’s most profitable carmaker after Ferrari and had the highest margin among manufacturers that sell more than 15,000 vehicles.

Also the planned Twitter takeover Elon Musk, whose numerous developments also moved the Tesla share price, should be completed in one way or another within the next 12 months, Schein believes. This should then possibly also shatter the fears of some investors that Tesla boss Elon Musk could be too distracted from his main company.

Gene Munster also believes that Tesla stock should be an interesting bet for long-term investors — not just because of the EV business, but also because of the other technologies Tesla is working on. According to “Bloomberg”, Munster explicitly named the humanoid robot Optimus. “There’s probably a one in ten chance that Optimus will work, but if it does it will be significant,” Munster said, adding that Tesla would have something other automakers like Ford or General Motors couldn’t offer.

Some key figures at Tesla still urge caution in the short term

Grace Capital CIO Catherine Faddis also believes Tesla stock could be close to a buy rating. “The stock is down more than a third and given its extreme valuation at 14 times past earnings, no one knows whether to buy more or sell outright,” Faddis told Bloomberg. In view of the massive price losses, however, the paper is probably closer to a purchase, according to Faddis. As “The Motley Fool” writes, the price-to-sales ratio for Tesla is currently 12.9. However, it’s averaged just 9.9 over the past five years, and 1.4 at its low, putting the stock still ahead of its five-year average in terms of price-to-sales. On the other hand, according to Bloomberg, Tesla shares are currently trading at around 59 times expected earnings, which is close to its lowest level since mid-2020.

So there is some potential, but Tesla shares may not be suitable for every investor at the moment, warns “Bloomberg”. Because in the short term, the turbulence to which the paper is exposed and the high volatility will not change.

Editorial office finanzen.net

Image Credits: Josh Edelson/AFP/Getty Images, Zhang Peng/LightRocket via Getty Images