Down between 29% and 82% from their 52-week highs, should you buy Tesla, Cognex or Plug Power on the dip?

Market volatility is intensifying again, with massive selling in many leading stocks. Tesla (NASDAQ: TSLA) And Cognex (NASDAQ:CGNX) have fallen in recent weeks, while Power supply by socket (NASDAQ: TAKE) continues its multi-year downward trend.

Here’s what’s driving the sale of these growth values and whether it is worth buying them at the drop.

From growth to value, then back to growth

Daniel Foelber (Tesla): Tesla has had its ups and downs in recent years. Long known as a growth stock, Tesla has historically been valued based on its earnings potential and cash flow rather than what it generates today. But that all changed in late 2022 when Tesla’s price-to-earnings ratio (PE) fell below 35 and its forward PE fell below 30.

Tesla stock price is expected to double in 2023, which would bring the valuation back to growth levels. Tesla once again seemed able to maintain its high operating margin and consistent sales growth. However, Tesla simply did not deliver the results that investors expected, which is weighing on the stock.

As you can see from the chart, revenues and profits have stagnated and margins are down significantly from record levels. The pace of electric vehicle (EV) adoption slowed downwhich challenges the idea that consumers are flocking to affordable electric vehicles and the world is moving away from the internal combustion engine. Tesla is talking less about electric vehicles in its earnings calls and more about big ideas like robotaxis, robotics, artificial intelligence, its Optimus robot, and more.

Morgan Stanley Analyst Adam Jonas values ​​the core auto business at $59 per share and the company as a whole at $310 per share. If you’re a Tesla fan, that’s not a big deal because the price target implies about a 50% upside to the stock. But let’s say you’re more skeptical about Tesla’s ability to monetize its moonshot ideas. In that case, there’s significant downside risk if Tesla’s auto business is actually worth less than a third of its current valuation.

Historically, Tesla’s valuation was based on selling electric vehicles to the masses. It did that, the stock remained a long-term winner, and Tesla impacted the global auto industry. But today, the fundamental investment thesis has changed once again. With growth slowing and a price-to-earnings ratio of 58.5, buying Tesla stock today is betting on its innovation. The good news is that Tesla has a rock-solid balance sheet and can generate free cash flow to fund its ideas.

In this light, Tesla is very different from a budding startup that can take on debt or dilute its stock to fund ideas. Tesla has the means to make leaps forward, but if the investment thesis is based on the performance of those leaps, it will need at least one to be a big success.

The story continues

If you’re willing to take a leap into the unknown with Tesla, the stock could be worth buying now. But if you prefer more certainty, it’s best to look for other opportunities.

Short-term weakness creates…