Should You Wait to Buy Tesla Stock After June 12?
Key Points
SpaceX is reportedly planning to go public by June 12.
Elon Musk supporters may be inclined to sell their Tesla shares and invest in the aerospace company instead.
Tesla's valuation, however, even if it comes down, is likely to remain high.
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It's been a rocky start to 2026 for Tesla (NASDAQ: TSLA). The electric vehicle (EV) maker's stock has been declining, and excitement around the business simply hasn't been all that strong of late. Intense competition and shrinking margins highlight just some of the biggest risks with the business right now. And while there is hope that in the future it'll go well beyond EVs and its operations will center around selling robots, that could be years away from becoming a reality.
Nonetheless, with a market cap of $1.5 trillion, it's still a highly valuable business, and one that investors have been paying a significant premium for. And a big reason investors are willing to look past its sky-high valuation is their belief in CEO Elon Musk and his vision for the company's future. But after June 12, when another one of Musk's companies, SpaceX, goes public, Tesla's stock could decline.
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Why the SpaceX IPO could be trouble for Tesla's stock
According to reports, SpaceX is planning to go public by June 12. Once that happens, there could be a flood of money going into the rocket and satellite company, which investors have been eagerly waiting to buy. Investors have even been looking at ways to gain exposure to SpaceX by investing in other companies that have stakes in the business. Demand looks to be incredibly strong.
The bad news is that for Tesla, money may end up leaving the stock and going into SpaceX. While Tesla is technically an EV stock, I'd categorize it as more of an Elon Musk stock than anything else. And with Musk's shiny new SpaceX stock becoming available, I believe many investors may look to liquidate their Tesla positions and use that cash toward buying SpaceX stock.
Tesla's stock may fall further this year, but it is likely to remain extremely expensive
While Tesla's stock may decline next month after the SpaceX IPO, it likely won't be severe enough to suddenly make it a cheap buy by any stretch. Today, it's trading at around 370 times its trailing earnings. Even when you factor in analyst expectations of how it will do in the year ahead, its forward price-to-earnings multiple is roughly 200.
At those kinds of obscene multiples, Tesla's stock would need to go into an all-out free fall for it to suddenly become reasonably priced. The reality is that even with a drop in value, you'll still need to be willing to pay a hefty premium for it and remain a big believer in Musk's vision for the company. For most investors, it may still be far too expensive to buy. But if you're bullish on it and willing to wait, I believe the stock may decline further this year, and buying at a lower price could at least reduce some of your risk.
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
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