As the world’s best financial market journalist, I have to tell you that Tesla (NASDAQ:TSLA) may have dropped 20% in the past month, but now is not the time to buy the dip. The foundation holding up Tesla’s stock price is shaky at best, with a forward earnings multiple of 82.4 – a sky-high valuation for a company facing challenges in its core electric vehicle business.
Despite the troubles, Tesla is still seen as a tech company with a bright AI future. The stock price hinges on potential AI-related announcements, but the failure to deliver on this front poses a major risk. So, why should you steer clear of TSLA?
Why Tesla Stock Has Held Up Relatively Well
Despite bad news like mixed quarterly results, weak guidance updates, and delayed product launches, Tesla’s stock has not completely crumbled. The speculation around an AI collaboration, especially with xAI, is keeping investors interested in the stock.
Expect Big Trouble if This Happens
The fate of Tesla’s stock could be tied to a potential Tesla-xAI collaboration. However, even if such a deal materializes, it may not be a silver bullet for the company. Concerns about the AI trend peaking could weigh on Tesla’s stock performance in the future.
The Verdict: Play it Safe, by Staying Out of Tesla’s Way
If history repeats itself and an xAI deal falls through, Tesla’s stock could face a major derating. With downside risks far outweighing the upside potential, it’s best to stay away from TSLA for now. A D rating in Portfolio Grader further supports this cautious approach.
Analysis: Despite Tesla’s AI potential, the current valuation poses a high downside risk. It’s best to avoid the stock until the AI hype stabilizes and the company’s EV business performance improves.