Down 46% from its 2023 high, is this my best chance to buy Tesla stock?

Tesla stock has crashed 46% since the highs of July 2023. It’s also lost 61% of its value since the record peak of November 2021. Is this my chance to buy?

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During 2023-24, stock-market pundits became obsessed with the Magnificent Seven, or Mag 7, mega-cap tech stocks. These giant corporations have driven the majority of the rise in the S&P 500 index since its October 2022 low. However, I would argue that Tesla (NASDAQ: TSLA) no longer qualifies as a Mag 7 member.

Tesla takes a tumble

On Friday, 5 April, I noticed that Tesla’s share price had plunged, making it among the worst performers in the S&P 500 that day. As I write, the stock stands at $162.05, down 5.3% since Thursday’s close.

What’s more, the valuation of Elon Musk’s prized asset has shown sustained weakness of late. It’s down 8% over five days and 10.3% in a month. Even worse, it’s crashed 37.7% over six months and has lost 12.7% of its value in a year.

That said, Tesla stock has skyrocketed 784% over the past five years, making millionaires of some of its most fervent supporters. But the majority of investors who climbed aboard since November 2020 will be nursing hefty losses — on paper, at least.

At their all-time high, the shares peaked at an incredible $414.50 on 4 November 2021. Repeatedly in 2020-21, I warned that Tesla stock was in a bubble that looked certain to burst. With a price-to-earnings ratio in the hundreds and no historic dividends, Tesla was held up by hope and hype.

Since their all-time high, the shares have crashed by 60.9%, losing more than three-fifths of their value in 29 months. They are also 45.9% below their 2023 high of $299.29, reached on 19 July last year. Ouch.

Time to buy Tesla?

Were this any other bargain-bin business, I might snap up its shares without hesitation. But Tesla is no ordinary company and Musk is no ordinary corporate leader. Indeed, his often bizarre public antics and personal behaviour have put me off buying Tesla stock for years.

Despite my dislike of Elon’s personality and management style, I’m giving serious thought to buying Tesla stock in the 2024-25 tax year, which began today (Saturday, 6 April). Still, I know that buying into this $500bn+ business will be a roller-coaster ride, because this is one really volatile stock.

Also, with a price-to-earnings ratio nearing 40, Tesla’s earnings yield is a mere 2.5% a year. I can easily find cheap UK stocks with earnings yields of 15%+, but my wife and I already own many Footsie value shares.

Tesla’s latest troubles

Then again, in its latest quarterly report, Tesla’s deliveries came in at under 387,000 electric cars. This was the lowest quarterly figure since 2022 and was 8% lower year on year. Analysts also warn that the group may have to slash sticker prices in order to keep up with booming Chinese competitors.

In addition, deliveries were down 20% versus the final quarter of 2023. This led one noted Tesla critic to warn that the firm could ‘go bust’, with its stock collapsing to just $14. Then again hedge-fund manager Per Lekander has been betting against Tesla shares since 2020 — a brave move.

Finally, I sincerely hope that Musk won’t drive Tesla into the ground, as he’s done at social-media group X, formerly Twitter. Despite my misgivings and with gritted teeth, I’ve added this auto/tech stock to my portfolio watchlist for 2024-25!

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 assessed. Consider taking independent financial advice.

Cliff D'Arcy 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.

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