Is Tesla Finally Cheap Enough to Buy? This Week on TheStreet Pro Survey.

Let’s try something different this week. A little less market sentiment and a little more stock sentiment. You see, this is a stock picker’s market, and I want to know what the stock pickers on our team think about a very popular stock: Tesla (TSLA).

Tesla shares were crushed last week following an earnings report showing that the company was spending heavily in R&D for AI, and investors are getting a little skeptical about AI spending. Plus, there’s a ton of global competition from Chinese EVs. All while Tesla is pivoting its business model from the very real business of making cars to a very untested business of… robots?

I’ll admit it. I’m biased when it comes to Tesla. I view the stock as a meme stock that trades based on the idolatry of Elon Musk. Musk hasn’t proven himself trustworthy since 2018, when he tweeted that he was taking the shares private. Between high valuation and low corporate governance, it’s a risky bet.

The market agrees with me. Yes, the stock hit an all-time high earlier this year, but shares have underperformed the S&P 500 since 2021. Great for traders. Bad for investors.

Obviously, I’ve made bearish arguments on the stock (here and here), but I’ve also written bullish comments, too, like this one. I even bought the stock at $110 in late 2022. One subscriber to our YouTube channel called me an ignoramus because I don’t idolize Elon Musk. That made me laugh! The stock is down since then, but I sincerely hope that person makes money. My job is to look at risk, and Tesla shares have always been risky.

However, it doesn’t matter what I think. Our team of experts are better stock pickers than I am, so read on to hear what they think of Tesla. But first, the sentiment survey!

Part 1: TheStreet Pro’s Sentiment Survey Results

Question 1

Direction: Over the next 2-4 weeks, how do you feel about the S&P 500?

Score: -1

Commentary: While the overall score here is bearish, the big news is that the majority of our respondents are neutral. There’s just one bull and two bears. The S&P 500 has spent the better part of the last 10 weeks just going sideways. In fact, volatility, as measured by the Bollinger Bands Bandwidth, is just about the narrowest it’s been in 6 months, which is a sign that the market is about to make a move (the bands don’t forecast direction, just volatility). Our team, however, isn’t picking sides. They’re picking stocks and will wait for the market to let them know what it’s going to do. For now, they’re not willing to commit.

Question 2

Positioning: How are you currently positioned?

Score: -1

Commentary:  That lack of commitment follows over to their portfolios. Again, it’s not like the team isn’t making trades. They’re being tactical, rather than looking for a trending market.

Question 3: What stock(s) are you most bullish on?

• Two defense sector stocks: RTX (RTX) and 3M (MMM)
• Small speculative biotechs because they have the potential for explosive moves.
• American Express (AXP), because card fee growth is expected to accelerate
• Apple (AAPL), which is now the largest stock in the S&P 500. It’s holding up well while other tech stocks sell off. Funds don’t want to sell it.

Part 2: Tesla

Question 1: Tesla. Do you believe in the company’s plan to switch from cars to robots? To what level of service would you allow a robot to live in your home?

Overall, the team is bullish on robots, though they warn that cybersecurity will be a huge concern and that a robotic future is more distant than Tesla’s chief cheerleader would have us believe. Who’s right? We’ll know in the fullness of time.

Two comments, in particular, are worth sharing on their own:

Louis Llanes tells us that “Tesla’s Optimus (robots) could lead to a major upside in the stock long term because of the potential high demand in new markets – labor relief for homes and industry, etc., but it carries huge risks – production challenges, high costs, safety issues, privacy concerns, and distraction from vehicles. Overall, the upside could be transformative, but huge snags are likely from execution snafus. Widespread home adoption is likely to be slower than expected, so Elon’s timeline seems faster than what is realistic. Either way, this will be the future, ready or not. I would allow robots in my home, but only after they are proven safe, with privacy rules that are acceptable, and the price is right. So I will not be an early adopter on this one.”

Ed Ponsi says, “30 years ago, growing up with a PC in your house would’ve seemed strange. 30 years from now, having robots in your house will seem normal.”

Personally, I’ll wait until robots are as friendly as The Jetsons’ Rosie.

Question 2: Elon Musk. Visionary or our era’s PT Barnum? Or…

Visionary? PT Barnum? It’s complicated. There’s no doubt that the man has done many good things to advance our society. Yet, he has a history of overpromising and not delivering (new Telsa Roadster?), or making broad claims that don’t hold up when the product is finally produced (Cybertruck, Cybertaxi).

Most critically, he opened the door for China to own the entire electric car market.

Question 3: Tesla shares are down 40%, and its PE ratio is now “just” 270x. If you were forced to put a price target on the stock, what would it be?

Alternatively, does it hit $250 or $450 first?

There was no consensus on this one. Four contributors decided that Tesla shares are too volatile to hazard a guess. Of the others, two think $250 is on the horizon, while one is gunning for $450.

I asked Helene Meisler for her opinion on Tesla. She shared it in Monday’s Top Stocks, which you can read here and below:

There will be those who draw the black line and think this is terrible for Tesla (TSLA). I would not disagree with that. However, my job is not to tell you it’s terrible; if you own the stock, you know it’s been terrible. My job is to determine where it might go in the coming weeks. I suspect TSLA gets oversold somewhere near that blue line (280-90-ish). There is decent support down there. And there is a short-term measured target down there. One point I would make is that on a daily basis (this is a 3-year weekly chart, so it is not obvious), TSLA has a habit of spending quite some time at support, developing a tiny little bottom, before it rallies well. If you are looking to bottom fish, I would say you have time.

Ed Ponsi wrote something very similar last week. Ed is a long-term bull on Tesla, so I take his caution very seriously. You can read more from Ed here and below.

Tesla was crushed on Thursday for a 14.5% loss. I consider Tesla a long-term hold, even though the stock is now trading at its lowest level in nearly a year. 

Is this Tesla selloff a buying opportunity? I’d be patient. We can’t ignore the huge turnover on Thursday’s decline, as Tesla saw its highest volume of the year so far. That volume spike indicates that institutional investors are lightening up on the stock. 

Where will Tesla shares find support? I’ve got my eye on the area between $287 and $300 (shaded yellow). If the stock stabilizes in that area, I’ll consider adding to my Tesla position.

Question 4: What’s the most important thing investors in Tesla should consider?

There was only one bullish comment: “That NeuroLink could someday be part of Tesla. I think NeuroLink has more potential than any other Musk company.”

The others struck a more cautious tone, saying people should consider:

• Elon Musk’s health
• Price action (the trend is your friend and the stock is trading at 2021 levels)
• The length of the road for its transformation (to a robotics company)
• Lawsuits due to safety concerns and a potential general decline in AI sentiment leading to a corresponding market drop.
• Valuations!

Conclusion

It’s a stock picker’s market, and the rewards will be rich for those who manage risk and invest in the upcoming winners. Will Tesla be one of those? Maybe. But you’d do well to wait until the valuation is a little cheaper. Personally, I think there is only one way to make money investing in Tesla shares. Buy tactically. Look for markets where the stock is heavily oversold and undervalued before buying. Then, consider selling some portion of your holdings when it’s heavily overbought. Someday, it’ll break out of this multi-year trading range. But that probably won’t happen until the valuations are rational.