For years, skepticism cast a shadow on Tesla, Inc. (NASDAQ:TSLA). Despite my persistent reservations and opposition to it being labeled a technology company, the tides have shifted. On May 6th, 2022, my article pondering TSLA’s 85.26% overvaluation stirred furious debate. As predicted, the stock price sagged from $295.67 to $112.71 by 2022’s end, a painful 61.88% descent.
However, a metamorphosis is afoot. My stance has evolved from bearish to neutral, reflecting TSLA’s expanding horizons beyond automotive pursuits. The post-Q4 earnings era saw TSLA stumble by 12.13%, triggering despair among institutional investors like Dan Ives, who publicly derided the results as a “trainwreck.”
Embracing this shift, I have begun purchasing TSLA shares, utilizing fresh capital rather than just relying on my wife’s ownership. My decision is motivated by a long-term view—a conviction that TSLA might dominate the S&P 500 by 2030. This sentiment isn’t a fleeting trade; it’s a foundational investment.
Despite my position, I warn against blind adherence to my strategy, as I anticipate further declines in TSLA’s trajectory, a sentiment that doesn’t daunt me in the slightest.
Reevaluating Tesla’s Prospects
Initially bearish due to TSLA’s lofty valuations hinged solely on automotive profits, my skepticism softened as TSLA diversified its revenue streams and attained a more compelling valuation. Although some aspects of the bullish narrative remain unconvincing, my stance pivoted due to four compelling factors, prompting me to inch towards a long-term bullish view, spanning a duration of 5-10 years.
Challenges on the Horizon
Mitigating my newfound optimism are a litany of potential pitfalls. TSLA’s transition beyond a carmaker hinges on flawless execution. In 2023, automotive revenue constituted a whopping 85.17% of TSLA’s earnings, with gross profits from this segment amounting to 90.77%. Furthermore, TSLA’s margins have been squeezed due to price cuts, and sustaining this strategy while expanding manufacturing may impede margin growth, potentially jeopardizing earnings per share estimates.
Another menacing hurdle is TSLA’s foray into the sub $25,000 market with their next-gen vehicle. Should they falter, it could diminish their capacity to tap into a vast market segment and stunt their growth trajectory.
TSLA is also ensnared by forces beyond their control, such as macroeconomic headwinds. Elon Musk himself acknowledged the threat posed by soaring rates, which not only strain margins but also limit consumer purchasing power. Furthermore, polarization surrounding EVs and TSLA, catalyzed by Musk’s own polarizing persona, poses a latent risk.
Furthermore, the realization of Ark Invest’s speculative theories, particularly regarding Full Self-Driving (FSD), looms as a nebulous milestone. Even if perfected, its monetization and widespread adoption hinge on governmental endorsement—a hurdle that could protract its viability to the mass market significantly.
