Once the United States presidential elections were over, there seemed to be an everything rally for the financial markets, or, as Warren Buffett likes to say, a rising tide lifts all boats. However, he also likes to add that when the tide goes out, that’s when everyone knows who’s been swimming fully clothed or not. Today, some call for shares of Tesla Inc. (NASDAQ: TSLA) to be in the latter group, considering its valuation today.
These bears would be wrong, though. Sure, the stock trades at a high price-to-earnings (P/E) ratio of up to 95.1x today, which is exorbitantly higher than the auto sector’s average valuation of only 18x. Investors would fail to realize, however, that Tesla is not just any other automotive stock. Therefore, it shouldn’t trade like one. Tesla behaves more like a technology stock and an artificial intelligence one for a reason.
