Tesla (TSLA) and Nvidia (NVDA) stocks have done well in the past few days as American equities bounced back. Tesla has jumped by over 33% from its lowest point in August and is slowly nearing its highest point this year. It has jumped by over 75% from the year-to-date low.
Nvidia has jumped by over 137% this year and is up by over 30% from its lowest level in August this year.
Tesla’s growth concerns remain
Tesla, the biggest EV company in the world, has done well even after it published weak financial results.
Its rebound is primarily because of two main factors: robotaxis and a cheaper vehicle. Tesla hopes to launch robotaxis in key cities, a move that some analysts believe will help it become a big competitor to Uber and Lyft.
In a recent earnings call, Elon Musk reiterated his belief that the robotaxi industry, helped by its full self-driving features, was a multi-trillion dollar opportunity for the company.
Tesla has started testing these features in China, where Musk has established a good relationship with the country’s leaders.
Additionally, Tesla is working on a cheaper vehicle as it works to fend off its Chinese rivals. A good example of this is BYD, a company that churns out cheap vehicles with many features. One of its upcoming hybrid vehicles will have a 2,000 range without recharging and refueling.
Tesla needs these products to work to justify its valuation. While Tesla has always been a highly overvalued company, this happens at a time when it was a near monopoly in the EV industry and when its sales and margins were growing.
Tesla has a trailing twelve-months (TTM) price-to-earnings ratio of 97 and a forward multiple of 97, making it one of the most overvalued companies in Wall Street. It also trades at a forward price-to-sales ratio of 7.30, higher than the sector median of 0.92.
