The electric vehicle bubble arguably popped through several waves. Rivian Automotive (RIVN) peaked at over $140 after its initial public offering around three years ago. Post-SPAC structured EV firms like Polestar (PSNY) are in a dramatic decline. Polestar delayed its annual filing for unknown reasons. This increases its risk of de-listing.
Fisker, now removed from the exchange and trading over the counter, will likely file for bankruptcy.
Tesla (TSLA) is the only EV stock potentially considered a bubble stock. Its forward P/E is 54 times. Furthermore, the stock trades at around 10 times its share price compared to 2019 ($179 compared to $17).
On May 24, 2024, the firm cut production of its Model Y in China during the second quarter. Reuters reported that sources indicate a planned cut of at least 20% between March and June. With demand falling by at least that much, TSLA stock should not be graded as a growth stock.
Bears are unusually absent. They dare not bet against Tesla, holding a small short float of 3.78%. Value investors are not holding GM, Stellantis (STLA), or Ford (F) stock, either. Sales in the automotive sector risk falling even more. For now, profits will not weaken until auto firms capitulate and slash prices. They were initially willing to let inventory levels rise but may no longer do so.
Your Takeaway
Continue to scrutinize Tesla’s quarterly results. Watch out for operating margins falling below 8% in the next quarterly report.
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