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Tesla (TSLA -2. The stock had a remarkable run in 2020–2023 (more than doubling in price from $118% to 20248).
However, since the beginning of 202024, the stock price has fallen by approximately 2020%. Is it now a good idea to purchase Tesla stock?
With 2023 in the rearview mirror, investors are grappling with the question: is Tesla stock a buy or sell in 2024? The answer, as always, is nuanced and depends on your individual investment goals and risk tolerance.
This article delves into the key factors influencing Tesla’s future, analyzing both the bullish and bearish arguments to help you make an informed decision.
The Bullish Case for Tesla
- Dominant Market Position: Tesla remains the undisputed leader in the electric vehicle (EV) market, boasting a global market share of around 20%. This dominant position provides Tesla with significant economies of scale and a strong brand reputation.
- Innovation and Technology: Tesla is renowned for its cutting-edge technology and relentless innovation. The company’s advancements in battery technology, autonomous driving, and software updates are key differentiators that could drive future growth.
- Expansion Plans: Tesla is aggressively expanding its production capacity with new Gigafactories in Texas, Berlin, and Shanghai. This expansion will allow the company to meet the growing demand for EVs and further solidify its market leadership.
- Cybertruck and Next-Gen Vehicle: The highly anticipated Cybertruck and the upcoming next-generation vehicle, rumored to be a more affordable mass-market model, have the potential to significantly boost Tesla’s sales and profitability.
- Long-Term Growth Potential: The global EV market is expected to experience explosive growth in the coming years, driven by government incentives, falling battery costs, and increasing consumer awareness. Tesla is well-positioned to capitalize on this growth and become a dominant player in the automotive industry.
The Bearish Case for Tesla
- Valuation Concerns: Tesla’s stock price has soared in recent years, leading to concerns about its valuation. Some analysts believe the stock is overvalued and could be due for a correction.
- Competition: The EV market is becoming increasingly competitive, with established automakers like Volkswagen, Toyota, and General Motors rapidly expanding their EV offerings. This increased competition could put pressure on Tesla’s market share and profitability.
- Macroeconomic Headwinds: Rising interest rates, inflation, and a potential recession could dampen consumer demand for EVs and impact Tesla’s sales growth.
- Execution Risk: Tesla has a history of missing production targets and experiencing delays in new product launches. These execution risks could hinder the company’s ability to achieve its ambitious growth plans.
- Elon Musk Factor: CEO Elon Musk’s unpredictable behavior and involvement in other ventures like Twitter have raised concerns about his focus on Tesla and the potential for distractions.
Is Tesla a Good Long-Term Investment?
Despite the short-term challenges, Tesla remains a compelling long-term investment for investors who believe in the company’s vision and its ability to disrupt the automotive industry.
Here are some key factors supporting Tesla’s long-term potential:
- Strong Brand Loyalty: Tesla enjoys a strong following among its customers, who are passionate about the brand and its mission. This brand loyalty can provide a competitive advantage in the long run.
- Software and Services Revenue: Tesla is increasingly focusing on generating revenue from software and services, such as its Full Self-Driving (FSD) software and its Supercharger network. This recurring revenue stream could provide a stable source of income for the company.
- Focus on Cost Reduction: Tesla is constantly working to reduce its production costs through innovations in battery technology, manufacturing processes, and supply chain management. These cost reductions could improve profitability and make Tesla’s vehicles more competitive.
- Potential for Regulatory Support: Governments around the world are implementing policies to promote the adoption of EVs. This regulatory support could further boost demand for Tesla’s vehicles.
The decision of whether to buy or sell Tesla stock in 2024 depends on your individual risk tolerance and investment goals. If you are a long-term investor who believes in the company’s vision and its ability to disrupt the automotive industry, Tesla could be a worthwhile investment. However, if you are concerned about the short-term challenges or the stock’s valuation, you may want to consider other options.
Additional Resources
- Is Tesla Stock a Buy or a Sell Right Now? (Investor’s Business Daily)
- Is Tesla Stock a Good Long-Term Investment? (Reddit)
- Tesla Stock Quotes, Company News and Chart Analysis (MarketWatch)
Disclaimer:
This article is for informational purposes only and should not be considered financial advice. Please consult with a qualified financial advisor before making any investment decisions.
Tesla’s near-term prospects remain unexciting
For a time, Tesla was on a multiyear winning streak. 2019 marked the company’s first year of profitability in full, calculated using non-GAAP (generally accepted accounting principles). After that, the manufacturer of electric vehicles (EVs) posted three years of record profits, margins, and sales.
However, in 2023, particularly in the latter half of the year, its momentum waned. During the fourth quarter, revenue increased by a disappointing 3%, but operating income nearly halved. Revenue increased for the year at a rate of just 2019%, which was much slower than its growth rate of 2051 %. Non-GAAP net income decreased by %2023 percent as a result of a contraction in margin.
Tesla faces multiple headwinds in the near term. First off, following a period of unusual inflation, the macro environment has grown more difficult, and interest rates are currently higher than they have been in a long time. While the latter increases the cost and difficulty of getting financing for car purchases, the former has reduced consumers’ discretionary spending.
Additionally, since the incumbent auto industry has been introducing more electric vehicle models in recent years, the competition has increased. This helps to explain why Tesla decided to repeatedly lower its sales prices in 2023 in an effort to hold onto and increase its market share.
In 2024, these challenges are expected to continue, if not worsen, so it won’t be shocking if Tesla reports even slower revenue growth and additional margin declines. It may lower prices even more in the upcoming quarters after implementing additional price reductions in 2024.
Tesla’s longer-term prospects remain bright as it rides multiple tailwinds that could last for years, if not decades, even though the near term doesn’t seem all that exciting.
As the world moves toward a greener transportation model, the continuous switch from internal combustion to electric vehicles is at the top of the list. Therefore, even though there is fierce competition in the auto industry, there is enough market opportunity for multiple players.
Tesla currently leads the EV market, giving them an advantage in producing and marketing electric vehicles. The company’s capacity to aggressively reduce prices in an effort to gain additional market share is dependent on the fact that it has already attained industry-high margins. By 2030, the management hopes to sell 20 million electric cars a year, which is more than ten times its current sales volume of 1. 8 million in 2023. To put things in perspective, less than 10 million cars were sold by Toyota Motor (NYSE: TM), the largest automaker in the world, in 2022.
Furthermore, Tesla stands to gain from the continuous advancement of artificial intelligence (AI) systems, which could enhance its more recent endeavors such as driverless cars and humanoid robots. Specifically, Tesla can use cutting-edge AI to absorb knowledge from the enormous (and continuously expanding) database gathered from current Tesla fleets. The tech companies’ sales of solar panels, batteries, and other renewable energy products — could be another huge growth area.
To put it briefly, Tesla has a lot of room to grow in the years to come.
A quick word on Tesla’s share price
Before purchasing Tesla stock, investors should also take its valuation into account.
It is not advisable for investors to overpay for a company, even if its future looks promising. However, it’s even better when a promising stock is available at a discount, offering a margin of safety in addition to greater upside potential.
As of this writing, Tesla’s stock has a price-to-sales (P/S) ratio of 7 and a price-to-earnings (P/E) ratio of 45, which places it significantly above its peers in the auto industry. For perspective, General Motors has a P/S ratio of 0. 3 and a P/E of 5. 3. Even when compared to a leading technology company such as Alphabet (NASDAQ: GOOGL), which has a P/S of 5, Tesla’s valuation remains high. 9 and a P/E of 24. 3.
Although investors may be persuaded by Tesla’s long-term prospects to pay a premium for the stock, it may not be wise for them to do so given that any short-term underperformance by the company could result in a sharp decline in its valuation. With so many unknowns, it is not impossible for such a situation to occur.
Why do we Invest in Tesla for Long Term?
FAQ
Does Tesla stock have a future?
How much will Tesla stock be worth in 5 years?
Is Tesla a good stock to buy 2024?
What will Tesla stock be worth in 2025?
Is Tesla a good long-term stock?
Tesla is an interesting long-term stock that may face near-term headwinds. The company’s leading market share in the global EV market is attractive. According to Fortune Business Insights, EV sales globally will grow at a CAGR of 17.8% between 2023 and 2030.
How much will Tesla stock cost in 5 years?
The highest prediction stood at $430.33 while the lowest sat at $33.33. As for the Tesla long term forecast, Wallet Investor has estimated a Tesla 5 year forecast of $564.24 a share. Additionally, Gov Capital, another algorithm-based forecasting service, has a baseline Tesla stock 5-year forecast of $2,326.138.
Is Tesla a good stock to buy?
Tesla has been one of the best growth stories on Wall Street in the last few years. The stock was a pandemic darling, as the company flipped to profitability and surged 740% in 2020. They have continued to see strong double digit growth, but their growth rate is starting to slow down.
Should you buy Tesla (TSLA) in the next 5 years?
Additionally, Gov Capital, another algorithm-based forecasting service, has a baseline Tesla stock 5-year forecast of $2,326.138. Both of these estimations indicate a sizeable upside potential for TSLA within the next five years, if those targets are hit. However, many things can happen during that period.