Are Tesla shares a buy at $1,000?

Tesla shares are currently hovering around the $1,000 mark after positive earnings results. Dylan Hood looks to see if he thinks this stock is a buying opportunity.

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Tesla (NASDAQ: TSLA) shares have continued their volatility throughout 2022, mainly due to supply chain issues and rising prices. At the time of writing, the shares are down 16% year-to-date, however, they’re up 37% over a 12-month period. Currently hovering around the $1,000 mark, is now the time to buy Tesla shares for my portfolio? Or should I stay away from the world’s biggest electric vehicle manufacturer? Let’s take a look.

Reasons to be cheerful

Tesla recently released 2022 Q1 results, which filled investors with confidence. In fact, Tesla shares surged over 10% on the back of the positive news. Digging into the numbers, revenues rose 87% year-on-year, with gross profit rising a whopping 132% over the same period. In addition to this, the company is flush with over $2.2bn of cash, 660% higher than the same period last year.

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The report also contained forward-looking guidance, which projects EV production to grow at 50% per year for the foreseeable future. This kind of growth will be vital if Tesla wants to retain its dominant market share against the fierce industry competition.

A key factor fuelling this growth will be the newly opened factory in Berlin. Since opening last month, the factory has reportedly hired over 8,000 of the 12,000 staff needed for capacity. Once the factory reaches full capacity, it will be able to produce 500,000 cars annually. For context, for the first three months of 2022, it produced 305,407 vehicles, so this is a huge step in the right direction.

Finally, Tesla also has a number of exciting new projects in the pipeline. One of these is the Tesla robo-taxi, which is an autonomous vehicle without a wheel or pedals. CEO Elon Musk reported that the taxi “would cost less per mile than a bus ticket” and would be ready for production in 2024. I think that the constant innovation that the firm delivers can support investors’ appetites for the shares.

Risks for Tesla shares

One risk that has been plaguing the entire EV industry for some time now is the supply chain shortage issue. This has been amplified by the Covid-19 pandemic. The 2022 Q1 report highlighted that “factories have been running below capacity for several quarters as supply chain became the main limiting factor, which is likely to continue through the rest of 2022”. This disruption could hold back the growth of Tesla shares.

The shares currently trade on an astronomical price-to-earnings ratio of 135. For context, good value stocks tend to trade on P/E ratios of under 10. However, this lofty valuation hasn’t turned investors away from the stock in the past, so I think it’s safe to say it could rise again, regardless of its crazy valuation.

What I’d do now

Overall, I think the future looks bright for Tesla considering the encouraging growth plans and good results. However, due to its lofty valuation and high volatility, I won’t be adding the stock to my portfolio today.

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Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK 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.

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.

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