Despite the current uncertain economic climate, the stock market has continued to climb. Unfortunately, the same can't be said about Tesla (TSLA +8.49%). Shares in the so-called "technology company that happens to make cars" have fallen over 9% year to date.
Compare that to the S&P 500, which is up 7.5% year to date. And mixed sentiment for the shares could persist, largely because you can make both a strong bull and bear case for Tesla stock.
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AI progress bolsters the bull case
Tesla stock is priced around $400 and, at first glance, appears patently overvalued. Shares of the electric vehicle (EV) maker trade for nearly 190 times forward earnings. No peer, including popular EV stocks like Li Auto, comes close to matching this rich multiple.
NASDAQ: TSLA
Key Data Points
However, the debate on how to value Tesla has long since passed. Valuing this growth stock from the "technology company" perspective prevails. Yet it may seem presumptuous for the market to prematurely value Tesla as if it were mainly in the AI, robotics, and autonomous vehicles businesses. But the truth is, Tesla is making serious progress in these areas.
It now has around 1.3 million subscribers for its Full Self-Driving (FSD) subscription package. The company has also launched robotaxi pilot programs in Austin, Dallas, and Houston. Further progress on these endeavors, as well as on its Optimus humanoid robot, could drive even greater bullishness for its shares.
The bear case also remains strong
Right now, investors are bullish on Tesla's cutting-edge ventures and satisfied with the performance of its automotive business. For now, this makes sense.
Last quarter, the company reported a solid 16% year-over-year increase in automotive sales, not to mention a 17% increase in earnings under generally accepted accounting principles (GAAP). However, if EV sales weaken while the AI and robotics businesses fail to pick up the slack, negative sentiment could be renewed.
With this in mind, it may be wise to wait for lower share prices, even if you're bullish on the ongoing transformation.
