Shares in Tesla (TSLA) have oscillated wildly over the past few weeks, initially wiping out the gains made through the early part of 2021. The stock partially retraced through a subsequent rebound rally, and the the dip in the shares came amid a wider market sell-off. However, the volatility may also signify that valuations for the electric motoring pioneer embody a significant blue-sky element.
The stock has always divided opinion, not least because of its debt profile, a potential pitfall if ever interest rates start to ratchet up in response to inflationary pressures. Even if you disregard finance and operating leases, group debt has ballooned over the past five years, notwithstanding liabilities linked to mandatory third-party purchase obligations.
Interest rate exposure is one thing, but as the switch to electric motoring accelerates, could it be that Tesla is in danger of being crowded out of the market? It is about to face increased competition from another heavyweight rival with enough financial clout and access to technical expertise to keep Elon Musk awake at night.