Tesla: Should You Ride the Momentum or Cash Out?

Tesla (NASDAQ:TSLA) has attracted a bit of attention in recent days, thanks to its impressive rally. After a 20.8% decline in April, the electric vehicle manufacturer surged by 24% in May. This has catapulted CEO Elon Musk back to the top spot of the Bloomberg billionaire index.

The discussion surrounding Tesla potentially benefitting from Artificial Intelligence has generated considerable buzz for the stock in recent months. But, Adam Jonas, an analyst at Morgan Stanley, warns in a recent note that while it's tempting to talk up Tesla's AI prowess, the stock's direction will be dominated by supply and demand for electric cars over the next 12 months.

And, in this regard, it doesn't seem to be doing badly. Tesla and Chinese rival BYD (SZ:002594) are leading the transition to electric vehicles, according to 'The Global Automaker Rating 2022' report, published by the International Council on Clean Transportation (ICCT).

This report ranks the world's leading light vehicle manufacturers on their transition to electric vehicles, including market share, technology, and strategic vision. Tesla also leads in other criteria, such as range, charging speed, and efficiency.

Source: ICCT

Tesla shares have risen significantly this year, gaining more than 77%, eclipsing the 33% advance of the Nasdaq 100 index and even outpacing the 64% jump of the NYSE FANG+ index.

Note, however, that this year's surge comes on the back of a 65% drop in 2022, which was the worst annual performance in the company's history, according to Bloomberg.

Tesla's gain in May is making investors wonder if the electric vehicle maker's stock has resumed its uptrend.

Many experts say that Tesla is overvalued, considering that its market capitalization is now at almost $690 billion, while other top automakers in the automotive sector do not even reach one-sixth of that.

For comparison, Volkswagen is worth $73.7 billion, and BMW is worth $67.2 billion.

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Disclaimer: This article was written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel, or recommendation to invest nor is it intended to encourage the purchase of assets in any way.