Tesla is one of the most innovative companies in the world. It’s the undisputed leader in global electric vehicle (EV) sales, one of the fastest growing industries in the world. However, Tesla’s share price has been volatile for the last few years and is currently trading 35% below its all-time high.
Naturally many investors are asking: “Is this a good time to invest in Tesla?”
My simple response: I like Tesla right here and I think this company and stock will perform well over the next few years. That’s why I’ve been buying some shares for myself and my client accounts.
Five Reasons I’m Bullish on Tesla
Tesla is a Powerful Brand: Tesla is one of the strongest and most recognizable brands in the world. In the U.S. its a status symbol to drive a Tesla, and the owners and proud to show them off. This is extremely rare territory for a company, similar to what Apple has going on – owners are proud to be in the club.
Tesla Has a Huge Lead in EV Sales: Tesla’s EV market share in the U.S. has slipped in the last year, from 62% to 50%. However, the company has a massive lead in the U.S. EV market that is going to be extremely difficult for other auto makers to catch up to both technically and financially. For example, Tesla is the only EV car maker that is turning a profit, its competitors such as Ford and Rivian are collectively still losing billions every year.
Tesla’s Big Revenue Growth: U.S. EV sales continue to surge. According to leading auto-market research firm Kelley Blue Book, U.S. EV sales hit 310,000 in the third quarter, up 50% from the same period last year. Keep in mind, EV are only 7% on U.S. car sales, and to me that means Tesla has plenty of upside in the U.S.
Tesla Expanding into New Markets: Tesla will also continue to grow and expand into global markets, such as China, India and countries in Europe.
Tesla Shares Down from the High: Some interesting things happening on the chart. Tesla is still trading 35% below its all-time high from November of 2021. Shares are basically even for the last three years from Dec 2020. In light of that decline, Tesla currently has a market value of $850 billion. The planet has already entered the age of trillion-dollar companies and I wouldn’t be shocked to see Tesla expand to a market cap of $2-$3 trillion in the next five years. Take a look at the Tesla stock chart below – I drew the blue line – this is what I expect from Tesla shares moving forward.
Potential Threats
Tax Credit on Model 3 May Fall 50%: Tesla recently announced tax credits from its Model 3 will drop by 50% from $7,500 to $3750 in early 2024. That’s a speed bump, not a road block.
History of Extreme Volatility: Tesla is a rock-star company, but this stock has been volatile. For example, Tesla shares fell 75% from November 2021 to January 2023.
Third-Quarter Earnings Report on Wednesday Oct 18: Tesla reports Q3 earnings on Wednesday Oct 18. Shares will probably whip up or down based on the news. My take – don’t worry about the short-term reaction too much, stay focused on the long-term opportunity.
The Big Picture on Tesla
Tesla is a rock star company with a rock star CEO. I see a number of catalysts on the horizon that tells me the company will continue to grow revenue and earnings for many years to come. However, keep in mind, this stock has a history of pretty intense volatility. Proper risk management is essential.
Despite potential volatility, overall I like this company and stock a lot and I am expecting more gains in the next few years. That’s why I have recently been buying some shares for myself and my clients – with a very small allocation to properly manage risk.
*Author Michael Vodicka owns shares of Tesla (TSLA).*
Disclaimer: This report is for entertainment purposes only. Every investor should consult with an investment advisor before making investment decisions. The Vodicka Group, Inc. is not a broker/dealer. We do not receive compensation for mentioning stocks. At various times, the clients, publishers and employees of Vodicka Group, Inc., may buy or sell the securities discussed for purposes of investment or trading..
