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The Tesla (NASDAQ: TSLA) share price has been rising this week after the release of the electric vehicle manufacturer’s Q2 results. The stock has been one of, if not the best, performers in recent times, up over 1,100% in the last five years.
Its share price has been pegged back this year, creating an opportunity for me to grab some shares for a cut-down price. However, I’m not sure if I’m ready to take the leap.
Strong results
Tesla is renowned for its strong growth. And its Q2 results certainly lived up to this.
Beating expectations, total revenue for the firm grew 42% year-on-year to $16.9bn, while it also outperformed projections by posting adjusted earnings of $2.27 per share.
With ongoing supply chain issues, such as factory shutdowns in a Covid-19-plagued China, it additionally managed to register its highest ever vehicle-production month in June. On top of this, the business also sold 75% of its Bitcoin, adding nearly $950m cash to its balance sheet. Overall, pretty impressive.
However, Tesla did see its automotive gross margin decrease as factors such as inflation and higher competition for components, such as battery cells, have driven up costs. This is part of wider market struggles, which have seen the NASDAQ fall 24% year-to-date.
Tesla outlook
So, with these strong results, should I be buying Tesla shares?
One deterrent for me is its high valuation. It currently trades on a price-to-earnings ratio of 110. While this has been higher in the past, this shows to me the stock is seriously overvalued.
What also concerns me is competition. As the global push for a transition to electric vehicles continues, many manufacturers have begun to develop their own models to challenge Tesla. With ambitious targets set by an array of firms, should they deliver on these the company may see its market share wane.
With this said, Tesla continues to expand its operations to maintain a firm grip over its dominant position. Its new gigafactory in Berlin has started to produce over 1,000 vehicles per week, which will significantly help with its expansion into Europe. And its gigafactory in Texas is expected to hit the 1,000-car milestone in the coming months.
With multiple new models also in the pipeline, like Tesla’s Cybertruck, this should help the business achieve its bold target of 50% average annual growth in deliveries.
What I’m doing
So, is this enough for me to buy?
I’m not sure. With a 52-week high of $1,243, it’s clear to see the scope the share price has to grow. And the steps it has taken to expand its operations could see Tesla continue to dominate in the long run. However, I won’t be buying today. Its large valuation is a deterrent for me. And I think the stock could slide further as macroeconomic pressures continue to bite. While I’m tempted to buy Tesla, I’m holding off for the meantime.