Tesla Stock’s Rally Hits the Brakes: Time to Sell?

Quick Read

• Tesla (TSLA) fell nearly 10% in five sessions and trades at 181 times forward earnings.

• Tesla received a ride-hailing permit from Arizona for its robotaxi rollout.

• Stifel raised its Tesla price target to $508 from $483 on optimism about full self-driving technology.

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It’s been quite the turbulent past month for shares of EV titan Tesla (NASDAQ:TSLA), which fell back to around $400 per share after running into a ceiling of resistance at just shy of $470. Undoubtedly, those looking to play a breakout in the name are now pondering the path ahead, now that the broad stock market has seemingly turned against all things tech (especially the tech names with significant AI exposure).

While Tesla is far more than just an auto company (I believe it’s valued as such, with the robotaxi opportunity and Optimus robot potential at the top of mind), the latest near-10% drop in the past five sessions is concerning to say the least, especially for a titan that Bill Gates reportedly had bet against for quite some time. Though it’s not clear whether Gates is still short Tesla stock as of this writing and by how much, Tesla CEO Elon Musk did reportedly warn Gates to close his “crazy” short position.

Bears are emerging, but that doesn’t mean it’s curtains for all AI stocks

Undoubtedly, CEOs firing back at big-name short-sellers is really nothing new, especially in this environment where many big-name investors are calling for a correction or painful bursting of an AI bubble. With Palantir (NASDAQ:PLTR) CEO top boss Alex Karp recently taking aim at Dr. Michael Burry over his recently disclosed put options, it certainly seems like an uneasy time to be a net buyer of big tech as such bears emerge.

Of course, Alphabet (NASDAQ:GOOG) seemingly deserves a free pass, given the latest round of 13F filings revealed that Warren Buffett’s Berkshire Hathaway (NYSE:BRK-B) had initiated a fairly sizeable position in the AI company. Arguably, the Alphabet bet seems to suggest that not all AI companies are bubbles about to burst.

Could it be that some AI stocks are deeply discounted while others are severely overvalued or even bubbly? I think that’s the likeliest case. But which camp would shares of Tesla belong to?

It’s really hard to say since Tesla stock, in my humble opinion, is one of the hardest of the Magnificent Seven to value. And since it’s not exactly the most-loved Magnificent Seven stock among the billionaire hedge fund community, I’d be more willing to take a rain check on shares of Tesla until the negative momentum subsides. Who knows? A buying opportunity closer to $350 per share might not be all too far off if the November jitters carry into the end of the month and into December.

What about robotaxis and FSD?

Of course, there’s the robotaxi opportunity to look forward to in the new year, and that’s the primary reason to think about buying this latest dip. With the EV firm recently gaining a ride-hailing permit from the state of Arizona, it seems like investors won’t have to wait too much longer for the robotaxi rollout to really pick up speed.

With Stifel recently hiking their price target on Tesla shares to $508 per share, up from $483, over optimism about full self-driving (FSD) tech and the robotaxi opportunity, perhaps there are timely rewards to be had from braving the dip right here.

In the meantime, Tesla stock seems to be moved primarily by the broad market’s concerns about valuations in some of the higher-flying AI names. And while new robotaxi developments (like the green light in Arizona) fly under the radar of most investors, I do think there will be an opportunity to punch a ticket to the name at a lower price at some point.

At 181 times forward price-to-earnings (P/E), shares aren’t exactly considered a value play, especially given Alphabet is magnitudes cheaper, with a robotaxi business in Waymo that many consider to be farther ahead in the race. While I’d much rather be in Alphabet stock on strength than Tesla on weakness, I would keep Tesla stock on the radar, as the name is prone to the odd sharp plunge every now and then. For traders, buying the drops and selling the spikes has proven quite profitable in recent years.

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