The Tesla share price is rising! Is it time to buy?

Its Q2 results bumped up the Tesla share price this week. However, our writer explains why he’s still not sure if it is time to buy.

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The Tesla (NASDAQ: TSLA) share price has been rising this week after the release of the electric vehicle manufacturer’s Q2 results. The stock has been one of, if not the best, performers in recent times, up over 1,100% in the last five years.

Its share price has been pegged back this year, creating an opportunity for me to grab some shares for a cut-down price. However, I’m not sure if I’m ready to take the leap.

Strong results

Tesla is renowned for its strong growth. And its Q2 results certainly lived up to this.

Beating expectations, total revenue for the firm grew 42% year-on-year to $16.9bn, while it also outperformed projections by posting adjusted earnings of $2.27 per share.

With ongoing supply chain issues, such as factory shutdowns in a Covid-19-plagued China, it additionally managed to register its highest ever vehicle-production month in June. On top of this, the business also sold 75% of its Bitcoin, adding nearly $950m cash to its balance sheet. Overall, pretty impressive.

However, Tesla did see its automotive gross margin decrease as factors such as inflation and higher competition for components, such as battery cells, have driven up costs. This is part of wider market struggles, which have seen the NASDAQ fall 24% year-to-date.

Tesla outlook

So, with these strong results, should I be buying Tesla shares?

One deterrent for me is its high valuation. It currently trades on a price-to-earnings ratio of 110. While this has been higher in the past, this shows to me the stock is seriously overvalued.

What also concerns me is competition. As the global push for a transition to electric vehicles continues, many manufacturers have begun to develop their own models to challenge Tesla. With ambitious targets set by an array of firms, should they deliver on these the company may see its market share wane.

With this said, Tesla continues to expand its operations to maintain a firm grip over its dominant position. Its new gigafactory in Berlin has started to produce over 1,000 vehicles per week, which will significantly help with its expansion into Europe. And its gigafactory in Texas is expected to hit the 1,000-car milestone in the coming months.

With multiple new models also in the pipeline, like Tesla’s Cybertruck, this should help the business achieve its bold target of 50% average annual growth in deliveries.

What I’m doing

So, is this enough for me to buy?

I’m not sure. With a 52-week high of $1,243, it’s clear to see the scope the share price has to grow. And the steps it has taken to expand its operations could see Tesla continue to dominate in the long run. However, I won’t be buying today. Its large valuation is a deterrent for me. And I think the stock could slide further as macroeconomic pressures continue to bite. While I’m tempted to buy Tesla, I’m holding off for the meantime.

RISK WARNING: 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. The Motley Fool believes in building wealth through long-term investing and so we do not promote or encourage high-risk activities including day trading, CFDs, spread betting, cryptocurrencies, and forex. Where we promote an affiliate partner’s brokerage products, these are focused on the trading of readily releasable securities.

Charlie Keough 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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