Stock market

2 car stocks that I wouldn’t touch from the barge pool in today’s market!

Image source: Getty Images

The stock market is heating up a bit in places. And for now at least, I’m a little concerned about these two high-profile car stocks — Tesla (NASDAQ: TSLA ) and The fugitive (NYSE:RACE).

Let me explain why I will not go near them today.

Waiting for the robotaxy.

As a car stock, Tesla is overvalued. Even Elon Musk knows this, telling investors to consider the company as a tech stock, not a company that just makes cars.

The problem is, it currently trades at 70 times forward earnings, and 81.1% of earnings come from car sales. While Tesla’s energy production and storage revenue is set to reach $6bn in 2023, it’s still a small part of the business.

So why is the stock still so expensive? Well, Musk has promised that the long-awaited — and I mean years-delayed — Robotaxis will be unveiled on August 8.

This could be a game changer for the company, opening up new revenue streams. Among other things, Tesla could operate as an automated taxi company.

It could make billions by selling additional computing power. This is because autonomous vehicles will need powerful computers. These will not be fully utilized as we do not drive our cars 24 hours a day.

However, I’m not sure what Tesla will actually unveil in August. Ultimately, a fully autonomous vehicle will be ‘level five’ autonomy – its current vehicles are only ‘level two’.

Additionally, it was recently reported that Musk has turned away thousands of people. NvidiaThe H100 artificial intelligence (AI) chips, from Tesla, were developed for the X (formerly Twitter). This is also problematic because, of course, these AI-dependent vehicles will need them.

In short, I wouldn’t touch Tesla with the barge pool today because I fear Musk is promising too much. It’s also worth remembering that it gave us the date for Robotex’s unveiling right after a disappointing set of Q1 results. He made a distraction.

However, if Tesla can let the cat out of the bag, I would definitely want to re-evaluate my position.

The data does not increase.

Ferrari is an amazing company. It has the strongest margins in the automotive industry – its gross profit margin is 49.8%.

These margins are only possible because of Ferrari’s brand recognition – the pinnacle of luxury sports cars – and its limited supply.

Founder Enzo Ferrari once said:Ferrari will always deliver one car less than the market demands.

However, for me, the numbers don’t add up. I’ve been neutral on the stock before, recognizing that investors just love great businesses. But, let’s face it, Ferrari is trading at 48 times forward earnings and that’s pretty expensive.

It just comes down to the fact that margins are already high and because Ferrari can’t increase production because it goes against the business model. Higher production can also put pressure on margins.

The Purosangue SUV will be produced in larger quantities than other models. However, Ferrari’s total deliveries are unlikely to exceed 15,000 anytime soon.

It’s a great company, but it’s too expensive for me right now.

Source link

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button