Tag: Stock pick

Aussie Broadband Ltd (ASX: ABB) shares have slipped around 2% at the time of writing, after the Australian Competition and Consumer Commission (ACCC) released its final determination on regulated voice interconnection rates.

The ruling is expected to result in a small reduction of the company’s EBITDA in the coming years.

What do investors need to know?

The ACCC’s ruling covers the key “terminating” and “originating” access services that allow voice calls to be connected between different carriers. These regulated rates determine what telcos pay each other to complete calls, meaning they directly affect the economics of networks such as Aussie Broadband’s voice platforms, NetSIP, and Symbio.

According to the company, the new rate schedule will result in a reduction of charges from 1 July 2026, with further step-downs occurring from 2027–2029.

For Aussie Broadband, the impact will not be immediate, as FY26 remains unaffected; however, management estimates an EBITDA reduction of approximately $3 million in FY27 and $6 million in FY28, after applying planned market-facing mitigation strategies.

There has been no determination on rates after 30 June 2029.

FY27’s impact represents less than 2% of the company’s FY26 EBITDA guidance, but investors nonetheless marked the stock lower as the long-term regulatory headwind became clearer.

In its announcement, the company signalled disappointment with the ACCC’s position, arguing that the decision risks undermining investment in fixed-line voice networks. CEO Brian Maher said:

While we acknowledge the delayed implementation date and the additional time this gives us to work through these changes with our partners and their customers, we are disappointed that ultimately the ACCC has disregarded the impact the reductions in regulated rates will likely have on challenger fixed-only providers that enable an essential infrastructure and service to the broader community. We also strongly disagree with their definition of a modern efficient operator and believe the ACCC has not fully considered or valued the resiliency and redundancy benefits of operating fixed voice networks.

These networks remain essential infrastructure for 000 emergency access, business operations, and network redundancy during mobile outages. Aussie Broadband also noted that it had provided significant input during the consultation phase, particularly regarding the impact on challenger providers.

Despite the setback, Aussie Broadband emphasised that it will pursue a range of mitigation initiatives to protect margins and support ongoing network investment. The company reiterated its Look-to-28 goals and maintained its commitment to keeping EBITDA margins at a minimum of 12.5%.

Foolish bottom line

While today’s share price decline reflects investor reaction to an unwelcome regulatory outcome, the long lead time before the changes take effect gives Aussie Broadband room to adjust its pricing, cost structures, and product mix. For now, the market is digesting the implications, but the company remains confident it can navigate the transition while continuing to grow its broader broadband and enterprise services footprint.

The post Aussie Broadband shares sink 2% on ACCC report appeared first on The Motley Fool Australia.

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Motley Fool contributor Kevin Gandiya has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Aussie Broadband. The Motley Fool Australia has recommended Aussie Broadband. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The S&P/ASX 200 Index (ASX: XJO) has followed Wall Street’s lead and is pushing higher. In afternoon trade, the benchmark index is up 0.4% to 8,624.2 points.

Four ASX shares that are rising more than most today are listed below. Here’s why they are ending the week with a bang:

4DMedical Ltd (ASX: 4DX)

The 4DMedical share price is up 23% to $3.55. Investors have been buying this respiratory imaging technology company’s shares after it entered into a commercial arrangement for the clinical use of CT:VQ with United States-based Cleveland Clinic. It is a CAT scan-based ventilation-perfusion software. 4DMedical’s founder and CEO, Andreas Fouras, said: “In just over three months since FDA clearance, we’ve established CT:VQ at three of America’s leading academic medical centres: Stanford, University of Miami, and Cleveland Clinic. This rapid adoption by elite institutions demonstrates the compelling clinical and operational advantages of CT:VQ over traditional nuclear VQ imaging.”

Develop Global Ltd (ASX: DVP)

The Develop Global share price is up almost 6% to $4.43. This morning, the miner and mining services company revealed that it has been awarded a $200 million underground development contract. This will see the company establish access tunnels at OceanaGold’s Waihi North Project in the North Island of New Zealand. Develop Managing Director Bill Beament said: “This contract reflects the strength and depth of our Mining Services division, which includes some of the most experienced underground mining specialists.”

Electro Optic Systems Holdings Ltd (ASX: EOS)

The EOS share price is up 13% to $8.24. This has been driven by news that the defence and space company has won another contract. EOS has received a new $32 million order for its R400 Remote Weapon System (RWS) from a North American prime contractor supplying Light Armoured Vehicles (LAVs) to an end-user in South America. The undisclosed customer is described as a large, investment-grade defence manufacturer. Management notes that the RWS is being supplied by EOS in a ground-to-ground configuration. The systems will be manufactured at its manufacturing facility in Canberra during 2026 and 2027.

Maas Group Holdings Ltd (ASX: MGH)

The Maas Group share price is up 8% to $4.86. Investors have been buying its shares after it entered into an agreement with sovereign AI Factory builder and operator Firmus Technologies. This is for the delivery of turnkey modular electrical infrastructure for Firmus’ first 100MW Launceston AI Factory cluster. The Australian construction materials, equipment and service provider advised that the agreement has an estimated total value of approximately $200 million.

The post Why 4DMedical, Develop Global, EOS, and Maas shares are racing higher today appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Electro Optic Systems. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Downer EDI Ltd (ASX: DOW) share price is in focus today after the company was selected as the preferred contractor for major New Zealand state highway road maintenance contracts. These agreements are estimated to bring in around NZ$870 million in revenue over coming years, boosting Downer’s position in the local infrastructure sector.

What did Downer EDI report?

• Selected as preferred contractor for four NZ Transport Agency Waka Kotahi (NZTA) road maintenance contracts
• Contracts cover Central Waikato (10 years), Taranaki (three years), Tairawhiti (three years), and Coastal Otago (10 years)
• Estimated total revenue of NZ$870 million over the contracted periods, to be finalised during negotiations
• Services include routine and emergency response, pavement and surfacing renewals, drainage and environmental maintenance
• Contracts commence May 2026, subject to final terms and agreements

What else do investors need to know?

Downer has reinforced its reputation in New Zealand’s critical road maintenance sector, deepening its longstanding partnership with NZTA. The scope of works covers comprehensive upkeep, renewals, and emergency response for major highway networks, aligning with Downer’s strengths in integrated services.

The new contracts extend Downer’s already substantial operations, highlighting its presence across 50,000km of urban and rural roads in both Australia and New Zealand. The business expects to cement its market leadership and continue delivering reliable services for government clients.

What did Downer EDI management say?

Downer’s Chief Executive Officer, Peter Tompkins, said:

Downer maintains more than 50,000km of urban and rural networks across New Zealand and Australia. These state highway contracts extend Downer’s long-standing relationship with NZTA. We are proud of this partnership and the outcomes we have achieved together – maximising value from network assets, while providing safe, reliable and accessible journeys for road users, and keeping New Zealand people and economies moving.

What’s next for Downer EDI?

The company is now working through the final contract terms, with works due to kick off from May 2026. Investors can watch for updates as commercial details are finalised and as Downer integrates the contracts into its broader service portfolio.

With continued demand for infrastructure services on both sides of the Tasman, Downer is well-positioned to benefit from ongoing investment in roads, essential services, and government-led projects in coming years.

Downer EDI share price snapshot

Over the past 12 months, Downer EDI shares have soared 46%, outperforming the S&P/ASX 200 Index (ASX: XJO) which has risen 6% over the same period.

View Original Announcement

The post Downer EDI wins $870m NZ highway maintenance contracts: What investors need to know appeared first on The Motley Fool Australia.

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Motley Fool contributor Laura Stewart has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips. This article was prepared with the assistance of Large Language Model (LLM) tools for the initial summary of the company announcement. Any content assisted by AI is subject to our robust human-in-the-loop quality control framework, involving thorough review, substantial editing, and fact-checking by our experienced writers and editors holding appropriate credentials. The Motley Fool Australia stands behind the work of our editorial team and takes ultimate responsibility for the content published by The Motley Fool Australia.

Santos Ltd (ASX: STO) shares are slipping today.

Shares in the S&P/ASX 200 Index (ASX: XJO) energy stock closed yesterday trading for $6.10. During the Friday lunch hour, shares are swapping hands for $6.03 each, down 1.2%.

For some context, the ASX 200 is up 0.5% at this same time.

That’s today’s Santos share price action for you.

Now here’s who’s taking the reins as Santos’ new chief financial officer (CFO).

New CFO steps in today

In an ASX release marked as non-price sensitive to Santos shares, the company announced this morning that Lachlan Harris has been appointed CFO, effective immediately.

Harris has 15 years of experience with Santos and was appointed acting CFO in October.

He was reported to have held a range of leadership positions, including across treasury, finance systems, and risk. Most recently, Harris served as deputy CFO and treasurer.

“I am pleased to confirm Lachlan’s appointment as CFO,” Santos CEO Kevin Gallagher said. “He has a deep knowledge of our business and the complex markets in which we operate.”

Gallagher noted:

Throughout his career at Santos, he has built a reputation with the board, management team, investors and capital markets for his financial acumen, analytical approach, strong risk mindset and leadership capability.

And with a nod to Lachlan’s potential to help support Santos shares over the longer term, Gallagher added:

Lachlan also has a proven track record of driving major initiatives at Santos. Most recently, he led our US$1 billion 10 year-bond offering, which was significantly oversubscribed.

With his experience and capability, Lachlan is well positioned to take on the role of CFO and support the business to maintain its laser focus on executing our strategy, in accordance with our disciplined low-cost operating model and capital allocation framework, to deliver long-term value for our shareholders.

What’s been happening with Santos shares?

On 16 October, Santos released its quarterly update covering the three months to 30 September.

Over the quarter, the ASX 200 energy share generated US$300 million in free cash flow. That brought the company’s year-to-date free cash flow from operations to US$1.4 billion.

And sales revenue of US$1.1 billion for the quarter saw year-to-date revenue reach US$3.7 billion.

Commenting on those results on the day, Gallagher said:

Our focus on operational excellence and our disciplined low-cost operating model has been crucial to achieving these results. With around $1.4 billion of free cash flow from operations generated year-to-date, Santos is well positioned to deliver strong shareholder returns with imminent production growth as we bring Barossa LNG online and move closer to the start-up of Pikka.

Santos shares closed up 0.8% on the day.

The post Buying Santos shares? Meet your new CFO appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Downer EDI Ltd (ASX: DOW) share price is heading higher on Friday. This comes after the infrastructure group flagged another large contract win across New Zealand.

At the time of writing, Downer shares are up 0.89% to $7.94. In comparison, the S&P/ASX 200 Index (ASX: XJO) is also rising by 0.5% following modest gains on Wall Street overnight.

What was announced?

According to the release, Downer confirmed that it has been selected as the preferred contractor for four New Zealand state highway maintenance contracts awarded by the NZ Transport Agency, Waka Kotahi.

Subject to final contract terms, the work is scheduled to commence in May 2026 and will cover state highway networks in Central Waikato, Taranaki, Tairāwhiti, and Coastal Otago.

The contracts will span anywhere between 3 to 10 years. Downer estimates that it will receive around NZ$870 million (roughly A$760 million) in revenue from the early stages of the four regions.

The scope of work includes routine and non-routine inspections, pavement and surfacing renewals, drainage maintenance, traffic services, environmental maintenance, and emergency response.

Why this matters

The announcement isn’t transformational, but it does reinforce Downer’s position in these markets.

This is ongoing road maintenance work rather than large construction projects, which aligns with the company’s focus in recent years on execution and margins.

Management also noted it already maintains more than 50,000 kilometres of road networks across Australia and New Zealand. That track record is often an advantage when governments are selecting contractors for essential maintenance road works.

Building on recent momentum

This update sits alongside a series of recent contract wins and operational improvements.

Downer has also continued to return capital to shareholders, with buybacks supporting earnings per share. Broker views have shifted gradually as a result, with some price targets raised following the company’s recent updates and briefings.

As a result, Macquarie lifted its price target by 11% to $8.50, while UBS notched up its target by 6.7% to $8.

Key takeaway

The market response to the announcement has been subtle, which probably reflects the nature of the update.

This announcement doesn’t change the near-term outlook for Downer, but it does add to the company’s base of long-term contracted work. It also fits with the way the business has been positioned in recent years, with a clear focus on execution, margin control, and earnings visibility.

For me, it doesn’t shift the buy or sell view. It’s another reminder that Downer is a steady, long-term infrastructure business.

The post Downer shares edge higher after New Zealand contract win appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Peter Warren Automotive Holdings Ltd (ASX: PWR) shares climbed around 5% today after the dealership group announced a major move to acquire Wakeling Automotive for $28 million.

Wakeling Automotive is a large multi-franchised dealer network operating across Macarthur, Wollongong, Shellharbour, and Moss Vale in NSW. It represents 16 popular car brands, including Hyundai, Kia, Mitsubishi, Nissan, Honda, Suzuki, Volkswagen, Mercedes-Benz, and Isuzu Ute.

The acquisition materially increases Peter Warren’s presence in one of Australia’s fastest-growing automotive regions.

The purchase price of approximately $28 million is funded through existing debt facilities and includes a significant goodwill component ($21.7 million of goodwill) as well as net assets at completion.

Why investors like this deal

This acquisition adds scale for Peter Warren, and management expects the deal to be immediately EPS accretive, even after funding costs. Wakeling Automotive generates roughly $500 million in annual turnover and employs around 370 staff. Peter Warren itself had revenue of $2,483 million in FY25.

It also complements Peter Warren’s existing Western Sydney operations. With the senior Wakeling team joining Peter Warren to continue running day-to-day operations, it reduces execution risk and preserves the culture of the 40-year-old family business.

Peter Warren CEO Andrew Doyle highlighted that the acquisition strengthens Peter Warren’s growing network and aligns with the group’s long-term consolidation strategy across the eastern seaboard. For investors, it reinforces the narrative that Peter Warren is emerging as a serious consolidator in the dealership landscape.

ASX All Ords share bottom line

Peter Warren is gaining scale in a key region, and while the transaction is still subject to ACCC and OEM approvals, today’s share price move suggests the market sees it as a smart, earnings-enhancing step forward.

Peter Warren shares are up 21% year to date and have a dividend yield of approximately 3%.

The post Here’s why a major NSW acquisition just sent Peter Warren shares higher appeared first on The Motley Fool Australia.

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Rio Tinto Ltd (ASX: RIO), Fortescue Ltd (ASX: FMG), and BHP Group Ltd (ASX: BHP) shares could face some fresh headwinds in 2026.

That’s according to a rather bearish iron ore price forecast from the analysts at Westpac Banking Corp (ASX: WBC).

Although Rio Tinto and BHP shares are deriving a growing amount of revenue from copper, iron ore remains the top revenue earner for all three S&P/ASX 200 Index (ASX: XJO) mining giants.

The iron ore price has been surprisingly resilient in 2025.

After briefly dropping below US$94 per tonne in early July, the industrial metal is currently trading at just over US$105 per tonne.

But that resilience may not last next year.

2026 iron ore price plunge could hamper BHP shares

Investors in BHP shares and rival ASX 200 mining stocks like Fortescue and Rio Tinto likely know to keep a close eye on what’s happening in China, the world’s top iron ore importer and steel maker.

And Westpac has cautioned that a large forecast increase in global iron ore supplies in 2026, coupled with material reductions in Chinese steel production, could trigger a 20% fall in the iron ore price (courtesy of The Australian Financial Review).

Citing similar market conditions to mid-2024, which led to a 21% fall in the iron ore price, Westpac senior economist Justin Smirk said:

This does give us more confidence in our expectations of a correction in iron ore prices as we move into 2026. We are forecasting a 20% fall in iron ore to US$83 a tonne by end of 2026.

What are other top analysts forecasting?

In potentially better news for investors in Rio Tinto, Fortescue, and BHP shares, Commonwealth Bank of Australia (ASX: CBA) isn’t quite as bearish in its 2026 forecast for the industrial metal.

But CBA does believe that increased supply from the massive Simandou iron ore project in Guinea and sluggish demand from China will see the price of iron ore fall below US$100 per tonne in 2026.

Barrenjoey recently reasserted its own forecast of US$100 per tonne in 2026, with a retrace to US$98 per tonne in 2027.

How have Fortescue, Rio Tinto, and BHP shares been tracking?

Amid the resurgent iron ore price since early June, the big three ASX 200 mining stocks have had a strong six-month run.

Over the past six months, the ASX 200 has gained 1.2%.

Here’s how these miners have fared over this same period:

• BHP shares are up 24%
• Fortescue shares are up 51.4%
• Rio Tinto shares are up 38.4%

The post Buying Rio Tinto, Fortescue and BHP shares? Here’s Westpac’s sobering 2026 iron ore price forecast appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended BHP Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

If you have space in your portfolio for some new additions, then it could pay to listen to what Ord Minnett is saying about two ASX 200 shares.

Here’s why it thinks they are in the buy zone right now:

AGL Energy Limited (ASX: AGL)

Ord Minnett thinks this energy giant is being undervalued by the market and has put a buy rating and $13.00 price target on its shares. This implies potential upside of almost 40% for investors from current levels.

The broker notes that there is a lot to like about AGL at the moment, which it feels is being overlooked by investors. It said:

The company has demonstrated solid momentum over recent times with the Tilt renewable asset sale, flexible capacity development at Bayswater, progress in its Western Australia operations and a series of power purchase agreements (PPAs), and we see further drivers to come from revaluation of its 20% stake in energy management platform Kaluza, a closure of Energy Australia’s Yallourn power station that will push Victorian wholesale prices, and thus AGL earnings, higher, and repricing of Tomago supply contracts. ‍

Post the investor day, we have raised our FY26 EPS estimates by 6.1% to incorporate wider electricity margins partially offset by higher growth capital expenditure, while our forecasts for FY27 and FY28 are trimmed 0.5% and 0.2%, respectively. Our target price on AGL has been upgraded to $13.00 from $12.00, and we reiterate our Buy recommendation.

Nextdc Ltd (ASX: NXT)

Another ASX 200 share that Ord Minnett is recommending to clients this month is data centre operator NextDC. It currently has a buy rating and $20.50 price target on its shares, which offers significant upside of over 65% for investors over the next 12 months.

The broker has been pleased with recent contract wins and feels that it demonstrates that demand for data centre capacity remains strong. It said:

Ord Minnett notes NextDC had only guided to 50–100MW of contract wins for FY26, so the latest announcement, along with industry feedback highlighting strong demand from both western and eastern hyperscalers, bodes well for the full-year outcome.

We have raised our target price on NextDC to $20.50 from $19.00 to incorporate our assumed value of the agreement with Open AI, although we have not yet changed our earnings estimates due to the lack of detail and operational timelines. We reiterate our Buy recommendation.

The post Ord Minnett names 2 ASX 200 shares to buy for massive returns appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Nextdc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Electro Optic Systems Holdings Ltd (ASX: EOS) shares have jumped around 7% to $7.78 (as of the time of writing) after the defence technology company announced it had secured a significant new international contract worth approximately $32 million.

In an ASX release, EOS announced a new order for its R400 Remote Weapon System (RWS) from a North American prime contractor supplying Light Armoured Vehicles (LAVs) to an end-user in South America.

The customer, while undisclosed, is described as a large, investment-grade defence manufacturer, which likely signals reliability and lower counterparty risk.

The order covers not only the supply of weapon stations but also vehicle integration kits, storage services, and a range of related components. Manufacturing will take place at EOS’ facility in Canberra throughout 2026 and 2027, providing the company with multi-year production visibility.

Why the market reacted so strongly

This latest win comes at a time of heightened momentum for EOS. The company has been steadily accumulating new contracts across its product portfolio, from counter-drone systems to high-energy laser weapons and traditional RWS platforms.

EOS now boasts an unconditional contract backlog exceeding $400 million, up sharply from $136 million at the end of 2024.

In other words: the order book has tripled in under a year.

For investors, today’s news reinforces the view that demand for EOS technology is accelerating across multiple regions, particularly in North America, Europe, and the Indo-Pacific. As global defence budgets rise, companies with specialised, combat-proven systems (especially counter-drone and remote-weapon technologies) are seeing increased procurement activity.

The contract also fits neatly into EOS’ turnaround narrative. After a volatile few years marked by balance sheet stress and program delays, the company is now consistently securing large, export-focused deals. Multi-year revenue conversion across 2026–27 provides clearer financial visibility and reduces execution risk.

Foolish bottom line

While defence stocks can be sensitive to contract timing, today’s rally suggests confidence is returning. With a growing backlog, an expanding global footprint, and sustained demand for advanced weapon systems, EOS appears to be rebuilding credibility, and investors have taken notice.

EOS shares are up a phenomenal 494% so far in 2025, eclipsing fellow market darling Droneshield Ltd (ASX: DRO), whose share price is up 252% year to date.

The post EOS shares take off on $32m US weapons deal appeared first on The Motley Fool Australia.

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• Top brokers name 3 ASX shares to buy today
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• By December 2026, $1,000 invested in EOS shares could be worth…
• Guess which ASX 300 defence stock has already rocketed 51% this week (Hint, not DroneShield)
• Why 4DMedical, DroneShield, EOS, and Star shares are rising today

Motley Fool contributor Kevin Gandiya has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended DroneShield and Electro Optic Systems. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Tesla (NASDAQ: TSLA) has been a fantastic stock for long-term investors, with returns exceeding 3,100% over the past decade. However, the company currently faces significant headwinds, as sales of its electric vehicles (EVs) are slowing, costs are rising, and it places big bets on unproven markets including robotics and autonomous vehicles (AVs).

It’s no surprise, then, that many investors are trying to determine what to do with Tesla stock. Is it a good time to buy with its shares priced under $500, or is it too early to take a risk on the company transitioning toward future technologies when its EV business is slumping?

Here are three reasons why I believe it’s best not to buy Tesla stock right now. 

1. Expenses are rising fast

Tesla CEO Elon Musk is transitioning his company toward an autonomous vehicle and robotics company. The idea is for Tesla to mass-produce its Optimus robots — up to 1 million by 2030 — and for the company to vastly expand its fledgling robotaxi service that’s currently only in a handful of cities. It’s worth noting Musk said in July the service would cover half the country by the end of the year, which is now, and it’s nowhere near achieving this.

There’s nothing wrong with Tesla focusing on these two opportunities, considering that AVs could eventually be worth $1.4 trillion by 2040, and humanoid robotics will be worth an estimated $5 trillion by 2050.

But to achieve its goals, Tesla is spending heavily, and it’s likely to increase from here. The company’s operating expenses rose by 50% to $3.4 billion in the third quarter, and research and development (R&D) costs jumped 57% to $1.6 billion. Management specifically said the operating cost increase was “driven by SG&A [selling, general, and administrative], AI and other R&D projects.”

For Tesla to expand into nascent robotics and AV markets, additional billions of dollars will need to be spent at a time when the company’s core business — selling electric vehicles — isn’t doing so hot.

2. Tesla’s core business is suffering

It’s easy to get caught up in Tesla’s big plans to be an autonomous vehicle and robotics company, but Tesla is still primarily an electric vehicle company right now. Unfortunately, business is not so good.

Tesla’s net income fell 37% to $1.4 billion in the third quarter, leaving the company with significantly less money to reinvest in the business.

Things could be getting worse, too. Following the expiration of the federal EV tax credits, Tesla’s vehicle sales fell below 40,000 in November — its lowest monthly sales in years. Tesla’s third-quarter results temporarily received a boost as customers rushed to take advantage before credits expired at the end of September, which helped lift Tesla’s revenue 12% to $28 billion in the quarter.

However, the November vehicle sales numbers indicate that Tesla and other EV manufacturers have a significant problem on their hands. EVs often cost more than traditional gas-powered vehicles, and after years of inflation and high interest rates, and no more tax credits, there’s less demand for EVs than in the recent past.

This would be a significant problem on its own for Tesla, but it’s compounded by the fact that the company is spending so much to move into robotics and AVs.

3. Its stock is expensive

Even if Tesla somehow pulls off its transition to AVs and robotics and turns around its stumbling EV business, it doesn’t eliminate the fact that investors are paying a high premium for a company as it makes risky moves.

Tesla’s shares currently have a price-to-earnings ratio of 206, far above the tech sector’s average P/E ratio of about 45.

This means Tesla’s stock is already priced for perfection at a time of significant transition, falling profit, and increasing expenses. That’s too risky for my liking, even if Tesla eventually achieves its goals. I think investors are better off not buying Tesla stock right now, at least waiting until the company can prove that it can reinvigorate sales and earnings from its electric vehicle business.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Should you buy Tesla while it’s below $500? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.