Tesla(NASDAQ: TSLA) shares started strong on Thursday following a quarterly report that exceeded expectations. Critics argue that the stock’s current valuation is excessive, and some observers concerned with Elon Musk’s political actions doubt the sustainability of these gains.

Despite such skepticism, Tesla’s stock has traded at significantly higher prices in the past. The recent financial report contained encouraging details that support a positive long-term outlook for the company, which pioneered the electric vehicle market. Let’s explore the reasons this may be a pivotal time to invest in Tesla stock.

1. Growing Profitability Outpaces Revenue

While revenue increased by 8% to $25.2 billion for the three months ending in September, this figure may not seem extraordinary. Investors were already informed of the 6% year-on-year rise in vehicle deliveries during the quarter. Even though average selling prices are decreasing, Tesla’s additional revenue channels—like subscriptions, accessories, and Supercharger stations—help paint a fuller picture.

Some critics indicate that Tesla’s profitability is being artificially inflated through the sale of regulatory credits to other automakers. Additionally, the company’s successful energy generation and storage segment has also contributed to the financial boost. Regardless, Tesla’s bottom line performance remains impressive.

Net income jumped 17% to $2.2 billion for the quarter, significantly outpacing revenue growth. After reducing prices on its vehicles and its autonomous driving subscription, Tesla still managed to report an operating margin of 10.8%, up from 7.6% a year ago. This marks Tesla’s strongest revenue growth in a year and is the first instance where profit growth has outstripped revenue growth in over a year—offering a hopeful outlook for investors.

Image source: Getty Images.

2. Autonomous Driving Technology Adds Value

Many online videos critique Tesla’s Full-Self Driving platform; it launched in beta a few years ago and undoubtedly has its flaws. However, regular updates are enhancing the automated driving experience.

According to Tesla, the number of miles driven without requiring driver intervention keeps increasing. Statistically, using autopilot has become safer than having a human driver behind the wheel. Although perfection may be unattainable, improvements that lead to safer driving are promising.

The market’s initial reaction was lukewarm when Tesla introduced its cybertaxi and robovan, which remain a few years from public use. By then, advancements in the technology behind fully autonomous vehicles are expected to enhance the driving experience. Tesla envisions the cybertaxi as an affordable alternative to public transit.

3. Musk’s Predictive Vision for Stock Value

During Tesla’s earnings call, CEO Elon Musk expressed confidence that Tesla will eventually become the most valuable company globally. This assertion seems bold, considering the company’s market cap is still 40% below its 2021 high. Nevertheless, Tesla’s current operational success is greater than it was back then.

To cut vehicle costs, Tesla is implementing efficiencies, which could enable the launch of a new vehicle priced around $25,000 after tax credits. Although specifics about how this new offering will differ from the entry-level Model 3 remain unclear, Musk assured investors it would include Full-Self Driving as a subscription feature.

This new model is anticipated to be available by early 2025, making it a notable timeline for potential buyers.

Tesla also discussed its semi truck and highlighted the upcoming two-seater and party van models earlier this month. Musk mentioned the ongoing revamp of the classic Roadster, although its rollout is less urgent compared to other priorities.

Ultimately, Tesla is demonstrating its unique position within the electric vehicle sector. Continuously evolving, the company often innovates more dramatically than its competitors, making it hard to discount its long-term potential despite current valuation concerns.

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Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool recommends and has positions in Tesla. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect those of Nasdaq, Inc.