Tesla’s stock price started to increase in early May after a busy few weeks with tariff changes, earnings reports and discussions about potential management changes. This upward movement in stock price was based on recent announcements surrounding the introduction of the long-awaited robotaxi service set for Austin, Texas in June.
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After a low under $222 in early April, Tesla’s stock closed at $318.38 on Monday, May 12, having regained its trillion-dollar market cap.
What should you do as a result of the increase in Tesla’s stock price? Here’s what the experts have to say about investing in Tesla right now.
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Do Wait Until Results Arrive From Recent Announcements
“Tesla’s recent surge is driven more by investor psychology than hard data,” said James Francis, an investing expert and CEO of Paradigm Asset Management. “Although the robotaxi announcement is exciting, it’s still just an announcement, nothing more.”
In other words, the current hype is a product of narrative speculation rather than proven adoption or revenue, since the launch hasn’t happened yet.
He added, “If the expectations on the robotaxi’s timeline, pricing or regulations are not met, the correction could be significant.”
While the recent news may be exciting for investors, how the launch goes and what revenue generates will play a part in whether investing in Tesla is a sound decision.
George Narinyan, an investing expert and the CEO of Value Sense, explained, “The recent Tesla stock movement follows a familiar pattern, surging on Elon Musk’s announcements and innovations like the robotaxi, despite ongoing competition from rivals.”
The experts are cautious about investing in Tesla, as this launch has yet to play out in real time.
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Don’t Take Too Much Risk
“The valuation of Tesla has always been predicated on the narrative that Elon Musk is a genius and that the future of the automobile industry is electric cars,” said Robert R. Johnson, Ph.D., CFA, CAIA, professor of finance at Heider College of Business, Creighton University.
“Even if we accept both of those premises, the valuation of Tesla is simply not justified,” he explained. “The narrative relies not only on the future of electric vehicles, but relies on the notion that Tesla will be the big winner in the EV sweepstakes.”
Johnson stressed that investing in Tesla isn’t worth the risk right now, even though the stock price has gone up recently. He also pointed out that Elon Musk made a strategic error by wading into political waters.
“What Musk has done by so closely aligning himself with Donald Trump is to alienate a large portion of potential Tesla buyers and current Tesla owners,” he explained. “This effect is not only in the U.S. but is perhaps even more acute globally.”
Johnson is worried about Musk’s political foray and Tesla’s stock being overvalued, which means you should avoid investing in the EV-maker based on his expert analysis.
And if you do invest — as with all stocks — don’t invest more than you can afford to lose.
Do Look Into Competitors
“For many years, Tesla has been viewed by retail investors as a proxy for the electric vehicle industry,” Johnson said. “But, they aren’t the only game in town, as other automotive companies are manufacturing electric vehicles.”
Johnson emphasized that there are no guarantees that Tesla will emerge as a winner in this space in terms of sales and valuation.
Barron’s pointed out that Tesla will compete with Waymo in the robotaxi industry. Waymo is already completing over 250,000 driverless rides weekly and has announced a partnership with Toyota for the development of self-driving technology in personal vehicles.
If you’re considering investing in Tesla, you may also want to research some of its competitors to see if you can find a better way to grow your funds.
Do Research and Remain Patient
Narinyan said some investors view recent price dips as buying opportunities, but the stock remains potentially overvalued.
He added, “For those considering investment, I recommend watching upcoming product launches closely and exercising caution.”
Narinyan believes that Tesla can offer upside potential for those with a higher risk tolerance, but the volatility requires careful decisions about how much you should invest.
Francis added, “Real revenue needs time to transition into revenue, and the markets are notoriously impatient. The key takeaway of this situation is that you should not just invest in stories; you should invest in how those stories scale.”
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Sources
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James Francis, Paradigm Asset Management
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George Narinyan, Value Sense
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Robert R. Johnson, Creighton University
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Barron’s, “Tesla Is Just Weeks Away From Launching Robotaxi Service. What It Means for the Stock“
This article originally appeared on GOBankingRates.com: Tesla Stock Is Rising — What Experts Say You Should (Or Should Not) Do
