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Tesla (NASDAQ: TSLA) shares fell out of favour when CEO Elon Musk joined in with US President Donald Trump’s political plans.
Sales have hit a sticky patch. April sales across 32 European countries tumbled 49% year on year. And that’s a period when total battery-driven vehicle sales climbed 28%.
Anyone who risked £10,000 on Tesla shares a year ago must have surely have taken a bit of a haircut, right? Not a bit of it. At the time of writing, the Tesla price has climbed 103% in those 12 months. That 10 grand would now be worth £20,300!
Tariff confusion
The past week hasn’t exactly clarified the risks to Tesla from President Trump’s tariff policies. The tariffs themselves tend to vary, sometimes quite wildy.
Then, on Wednesday (28 May), the US Court of International Trade judged them an overreach of presidential authority and ordered their suspension. But the next day a federal appeals court ruled the tariffs can stay while legal arguments are thrashed out.
On the Musk side of the equation, the boss has finished his White House duties and returned to work at the company. That seems to have pleased a lot of investors who see his focused attention as essential to Tesla’s success.
He still has SpaceX to distract him from those down-to-earth cars. But maybe a few more of his rockets will blow up and he’ll lose interest.
What next
So, Tesla shares have had a good 12 months, even if they did go through something of a boom and bust between November and March. But where might they go in the next 12 months?
You know, this is one where right now I really have absolutely no idea. They could double in price, or halve in price for all I know. That makes me uncomfortable, as with most stocks I at least have a bullish or bearish take even if I might struggle to put a number on them.
But in this case, I couldn’t do better than toss a coin. And I reckon it’s important to be honest, with ourselves and with others, when we’re this clueless.
But one thing I can do, at least, is explain what’s pulling me in each direction.
Bulls and bears
I’m buoyed by the sheer potential of Tesla’s technology more than the cars themselves. Yes, the vehicular future is surely electric. But Tesla’s pioneering battery technology, robotics, autonomous driving, and AI developments, could have enormous potential above just replacing our gas guzzlers.
Some analysts have their price targets up around $500, a fair bit ahead of the current price.
But then I turn to the stock valuation. And even though I know what I’m going to see, that forward price-to-earnings (P/E) ratio of 225 still makes me miss a beat. Even if the lowest broker target of $115 comes true, the P/E would still be at 73.
Those siding with the more bullish brokers should no doubt consider buying. But the uncertainty and risk are too much for me.
