Tesla Stock Rally Hits the Brake: Time to Sell?

• Tesla (TSLA) fell nearly 10% in five sessions and trades at 181 times forward earnings.

• Tesla received an Arizona transportation permit for its robotaxi launch.

• Stifel raised its price target on Tesla to $508 from $483 on optimism about fully self-driving technology.

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The past month has been quite turbulent for shares of the electric vehicle titan tesla (NASDAQ:TSLA), which fell back to around $400 per share after hitting ceiling resistance at just $470. Without a doubt, those looking to achieve big success in the name are now mulling over the path forward, now that the broader stock market has seemingly turned against all things tech (especially tech names with significant exposure to AI).

While Tesla is much more than just an automotive company (I think it is valued as such, considering the robotaxi opportunity and the potential of the Optimus robot), the latest near 10% drop over the last five sessions is worrying, to say the least, especially for a titan that Bill Gates had supposedly been betting against for quite some time. Although it is unclear if and to what extent Gates is still short Tesla stock as of this writing, Tesla CEO Elon Musk reportedly warned Gates to close his “crazy” short position.

To be sure, CEOs responding to big-name short sellers is nothing new, especially in this environment where many big-name investors are calling for a correction or a painful burst of an AI bubble. With Palantir (NASDAQ:PLTR) Chief Executive Alex Karp recently targeted Dr. Michael Burry for his recently disclosed put options, it certainly seems like a tough time to be a net buyer of big tech as such bears emerge.

Of course, Alphabet (NASDAQ:GOOG) apparently deserves a free pass, given that the latest round of 13F filings revealed that Warren Buffett Berkshire Hathaway (NYSE:BRK-B) had initiated a fairly large position in the artificial intelligence company. Arguably, Alphabet’s bet seems to suggest that not all AI companies are bubbles ready to burst.

Could it be that some AI stocks are deeply discounted while others are highly overvalued or even bubbly? I think that’s the most likely case. But which side would Tesla shares belong to?

It’s really hard to say since Tesla stock, IMHO, is one of the hardest to value of the Magnificent Seven. And since it’s not exactly the most beloved Magnificent Seven stock among the billionaire hedge fund community, I’d be more willing to hold off on Tesla stock until the negative momentum subsides. Who knows? A buying opportunity near $350 per share may not be too far away if November jitters carry over into late month and December.

Of course, there is the robotaxi opportunity we expect in the new year, and that is the main reason to think about buying this latest dip. Given that the electric vehicle company recently obtained a ride-hailing permit from the state of Arizona, it appears investors won’t have to wait much longer for the robotaxi rollout to really accelerate.

Given that Stifel recently raised its price target for Tesla stock to $508 per share, up from $483, on optimism about full self-driving (FSD) technology and the robotaxi opportunity, perhaps there will be timely rewards in braving the decline right here.

Meanwhile, Tesla stock appears to be moved primarily by the broader market’s concerns about the valuations of some of the biggest flying AI names. And while new robotaxi developments (like the green light in Arizona) fly under the radar of most investors, I think at some point there will be an opportunity to get a ticket to the name at a lower price.

With a forward price-to-earnings (P/E) ratio of 181 times, the stock isn’t exactly considered a value play, especially considering Alphabet is much cheaper, with a robotaxi business in Waymo considered by many to be further down the road. While I would rather be in Alphabet stock for its strength than Tesla for its weakness, I would keep Tesla stock on the radar as the name is prone to the odd sharp drop from time to time. For traders, buying the dips and selling the peaks has proven quite profitable in recent years.

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