Why I’m buying Tesla stock in September

After growing at an incredible rate during 2020, Tesla stock has slowed down. Here, Charlie Keough looks at whether now is a good time for him to buy.

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The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

The Tesla (NASDAQ: TSLA) share price rose nearly 700% in 2020, yet as I’m writing, Tesla stock has stagnated year-to-date. So, with the electric vehicle (EV) market continuously growing, does this blip in the price of Tesla stock present itself as an opportunity for me to buy, or could it be a warning of trouble ahead? Let’s take a look.

Regulators target Autopilot system

One factor driving the bump in the road of the Tesla stock price is due to an investigation into the firm’s Autopilot system, which has allegedly been a potential cause of a string of crashes involving its cars. The US National Highway Traffic Safety Administration investigation relates to over 700,000 Tesla vehicles – across multiple models – and is targeting crashes since 2018, leading to 17 injuries and one fatality. Speculation on the share price impact may be premature, yet I suspect that the outcome could be a negative one for Tesla. This may, in the short term, have a detrimental effect on the share price, but I don’t see this as a long-running issue. Instead, I would argue it makes this a good time for me to grasp a buying opportunity.

Tesla’s latest results show that the firm is maintaining its impressive levels of growth. Total revenue grew 98% year-on-year in Q2. Tesla cited growth in vehicle deliveries for this. Over 201,00 vehicles were delivered, equating to a 121% rise from Q2 2020. The firm also produced over 205,000 cars, a record production number. Continuous growth like this is an appealing reason for buying the stock.

Tesla stumbling block

Yet, one stumbling block for me is its valuation. My colleague Charles Archer asked, is Tesla stock overpriced due to investors’ high expectations? For me, this does raise concerns. Does it mean a drop in the price of the stock could be inevitable? 

Possibly. But I also believe this high price is because of faith in CEO Elon Musk. The firm’s innovative founder has led Tesla to where it is today and I think many investors buy into his unique ideas, as do I. The firm is continuously evolving and its growth underlines this.

The competition Tesla faces may also be an issue. A current example of this is Ford, which is moving to all-electric by 2030. Also, as more vehicle producers move into the world of electric, and as governments worldwide pile further pressure on producers, this could mean Tesla lose a grip on its big market share. This would inevitably harm the price of Tesla stock.

Is it a buy for me?

I’ve highlighted issues with the stock, but still think now is a great time to buy. Although a rise in competition is inescapable as consumer demand for EVs increases, I think Tesla’s innovation – stemming from Musk – puts the firm in good stead. Its Q2 results show that even through tough times it can perform strongly. That highlights just how robust the firm is. As such, I believe September is a good time for me to buy.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Charlie Keough does not own shares in any of the companies mentioned. The Motley Fool UK owns shares of and has recommended Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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