If you even think of electric vehicles (EV), it’s likely the first word that pops into your mind is Tesla (NASDAQ:TSLA). I can’t blame you. Tesla stock has soared thanks to its investment in EVs, but it’s also experienced volatility from the investment as well.
Just recently, shares plunged over 11% this week (yes, as in Monday and Tuesday), as the company reported a shipments slump, as we see new price cuts in China.
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Why you may want to reconsider Tesla stock
Look, I’m not going to lie. Tesla stock does look like a strong long-term investment when it comes to EV stock. However, that depends entirely on the valuation. And when it comes to Tesla stock, it is high in terms of share price.
Tesla stock currently trades at a significant premium compared to other automakers and even other EV stocks. And in a rapidly expanding EV market, this is likely to continue to drop. Established automakers are now in the space, as well as new startups — not to mention competition overseas.
What’s more, Tesla stock’s profit margins have come under pressure from rising costs and price cuts simply to maintain its competition. This has raised concerns about future profitability.
Finally, there’s Elon Musk. The company is so tied to the public image of Musk that his actions as chief executive officer can affect the stock price — positively, but certainly negatively as well. In fact, shares are nearing their 52-week low. And I would continue to hold off until there is some positive news about EV stocks and Tesla stock as well before jumping back in even at those levels.
Still, stick to EV stocks!
That all being said, there are other EV stocks that I would still consider. After all, there is a reason Tesla stock has done so well. And that’s because more competition means more interest in EV stocks and EVs in general.
There is high-growth potential in the space, driven by factors like environmental concerns, decreasing battery costs, and increasing consumer demand. It’s now seen as a disruptive technology with the potential to revolutionize the transportation industry. This comes from continued innovation and diversification in the field. And more companies mean there is less risk being invested.
And honestly, don’t downplay the environmental impact. This also goes in hand with government investment as well. This can benefit you as a consumer as well as an investor.
One stock to consider
As for another investment, if I’m getting into EV stocks, I’m going a touch off the radar. Instead of Tesla stock, I’d consider a company such as NFI Group (TSX:NFI). NFI stock is far cheaper, trading at just $11.50 as of writing. Yet it’s highly valuable, trading at 11.12 times earnings over the last year.
However, during fourth-quarter earnings and 2023 results, the company reported a net loss for both. This has raised concerns about future profitability, with a lot of competition of course from other EV stocks. Even so, there are some benefits to be had.
For instance, NFI stock announced that the battery they use is has been found to be the most efficient electric battery for its double-decker busses in the United Kingdom. Further, it ordered 12 more double-decker buses to climb on deck. It’s now a leader in the electric and low-floor bus market around the world. Its diversified products and focus on innovation have also led to strong performance in the past. Again, you can’t ignore that value.
So, with shares actually up a whopping 25% in the last year and more to come, NFI stock looks like a great option — especially when compared to a risky company like Tesla stock.
