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Tesla (NASDAQ: TSLA) stock continues to fall. As I write this, the electric vehicle (EV) manufacturer’s share price is sitting at $168, over 50% below where it was this time last year.
Is this a great opportunity to buy the growth stock for my portfolio? Or is there further downside on the cards here? Let’s discuss.
Long-term growth potential
From a long-term investment perspective, I continue to believe that Tesla has a lot of potential.
This company isn’t just a play on the EV growth story. Instead, it’s a play on EVs, self-driving technology, artificial intelligence, batteries and renewable energy, robotics, and more. Put all these things together and the future looks exciting. Tesla CEO Elon Musk believes that the company can be bigger than Apple and Saudi Aramco combined.
It’s worth pointing out that Tesla, which has grown its sales by around 150% over the last three years, is expected to keep growing at a rapid pace in the years ahead. For 2022 and 2023, Wall Street analysts expect it to generate revenue of $83.5bn and $116.6bn respectively. These figures represent growth of about 55% and 40%.
Why the stock could go lower
In the short term however, I see a number of factors that could potentially send Tesla’s share price lower. One major issue right now is Musk’s purchase of Twitter. This could be a real distraction for the visionary CEO. Will he have enough time to run both Tesla and Twitter?
It’s worth noting that since Musk took over Twitter, Tesla’s share price has fallen around 30%. This suggests investors are genuinely worried that he may take his eye off the ball.
China is another potential problem for Tesla. A recent spike in Covid cases has led to speculation that the country could face stricter lockdowns. This could impact Tesla’s production in the region. An additional issue here is competition. Recently, Tesla cut its prices in China on some of its models by 9% as a result of competition.
Logistical issues are a third issue of concern. Right now, Tesla is struggling to deliver its EVs. As a result, it’s looking unlikely the group will be able to achieve its 50% year-on-year delivery growth target for 2022.
Finally, it’s worth talking about Bitcoin briefly. Tesla stock and Bitcoin have a strong positive correlation. It seems a lot of investors own both assets. If Bitcoin continues to struggle, it may have an impact on Tesla’s share price.
A risky bet?
Combine all these issues with the fact that the stock is still expensive (the forward-looking P/E ratio is 41) and locked in a steep downtrend (with a bearish ‘head and shoulders’ pattern) and the risk level is high, to my mind. I suspect there could be further downside in the near term.
I’m not the only one with this view. Earlier this month, Morgan Stanley EV analyst Adam Jonas said that Tesla could hit $150 before 2023.
So, right now, I’m not a buyer of Tesla stock. I think there’s a decent chance there will be better buying opportunities for me in the months ahead.
