This Billionaire Just Sold Out of Tesla Stock. Should You Follow?

In the first quarter of this year, one of the world’s most prominent and successful investors sold out of big positions in Tesla (TSLA 1.18%). In a regulatory filing, Geroge Soros’ family office, Soros Fund Management, revealed that it no longer held a single share or derivative of the high-profile electric vehicle (EV) maker.

We should never, of course, blindly follow the moves of another investor, no matter how successful they have been. But maybe Soros was on to something here, so let’s explore whether it’s time to ditch or dive into Tesla stock.

Buying on the dip

At the end of 2022, as detailed in its next-to-latest 13F, a document itemizing an institutional investment manager’s holdings, Soros Fund Management held 132,046 Tesla shares. At the time this position was worth just under $16.3 million. The company also owned 200,000 Tesla call options, which were valued at slightly over $24.6 million in total. 

In the next 13F, covering the first calendar quarter of this year, neither position was anywhere to be found.

Interestingly, the 13F previous to the one featuring Tesla reveals a notably smaller stake, of 89,647 shares, in the EV maker’s stock, and no call options. Ditto for the one before that, which detailed only a 29,883-share position. By far the majority of the Tesla buys, then, occurred in the second half of 2022.

Across that July through-December period, Tesla’s stock price cratered by nearly 46%. That was a far worse performance than the S&P 500 index’s essentially flat trajectory. It also compared unfavorably with the respective 28% and 38% declines of fellow EV manufacturers Rivan and BYD.

The terrible ’22

Tesla’s nearly 50% swoon was the confluence of several negative factors. The car industry at the time was in the doldrums on climbing interest rates, worries about the economy, and persistent supply chain problems. Narrowing to the EV segment, competition continued to heat up across key categories and geographies. It’s hard for a market leader to maintain share when the competitive space keeps getting more crowded.

As if those factors weren’t challenging enough for Tesla, CEO Elon Musk ended up following through with his promise to buy Twitter. Many Tesla investors felt — with some justification — that he was taking his hands off the wheel of their company in a quixotic attempt to be a social-media king.

Things began looking brighter with the dawn of 2023. Data released early in January revealed that total EV sales in the U.S. in 2022 climbed by more than 65% year over year to top 807,000 units, indicating intense demand for such vehicles. Slamming this point home was Tesla’s fourth-quarter results published the following month; the company posted solid growth numbers and beat analyst estimates.

Meanwhile, Tesla showed it was ready to adjust to the stiffening competition, not to mention those still-looming economic storm clouds, by being aggressive with price cuts. And on the Twitter front, last month Musk found a CEO to replace himself: Veteran big-corporation executive Linda Yaccarino.

This year’s model

2023 hasn’t been entirely a joyride for Tesla — for example, first-quarter results featured some disappointing numbers — but the future looks better than it did in the gloomy fading months of last year.

As a result, Tesla stock has generally trended up of late, and it’s no longer the bargain it was in those dim days. Its price-to-sales ratio is very caloric at 6.2, the price-to-book value stands at over 10, and the forward P/E is a vertigo-inducing 42-plus. Comparable figures for much of the competition — pure-play EVs and auto industry incumbents alike — are far lower.

Yet despite its recent trials, tribulations, and Twitter side journeys, the company continues to be the standard-bearer for the EV segment. If demand remains strong for such models, Tesla will surely continue to grow and profit — after all, the image many people conjure when hearing the initials “EV” is one of the company’s models. These are all very attractive vehicles, meanwhile, and style counts in the auto business. 

Ultimately, while I think there are more interesting EV plays among the less-famous, offbeat companies in the space — such as Europe-based charging station specialist Allego — Tesla still has much going for it. For those who believe in the great promise and potential of the EV segment, it remains a must-own stock.