Tesla Stock: Positioned for Growth Amid EV Market Changes
An Overview of Tesla’s Market Position
Currently holding a Zacks Rank of #1 (Strong Buy), Tesla (TSLA) is recognized as a leader in the electric vehicle (EV) sector and a prominent technology innovator. Note that we have been long on this stock since April.
Despite its relatively recent emergence compared to established players like Toyota Motors (TM), Ford Motor (F), and General Motors (GM), Tesla has successfully captured about half of the U.S. EV market. The company focuses almost entirely on this segment, minimizing traditional marketing methods. While Tesla’s automotive sales lead the company’s revenue, its energy generation and storage facets are increasingly profitable.
Tesla’s Growth Trends: Signs of Recovery
Although Tesla’s earnings growth has recently slowed, Zacks Consensus Estimates indicate a promising increase of 29.65% in annual earnings by 2025.
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Three Key Reasons for Tesla’s Current Potential
Here are three fundamental factors expected to boost Tesla’s earnings soon:
1. Cybertruck Sales: Tesla CEO Elon Musk announced that the Cybertruck became the third best-selling EV in the U.S. this past quarter, trailing only the Tesla Model Y and Model 3. As production becomes more efficient, Cybertruck deliveries are likely to increase significantly.
2. Lower Interest Rates: A more accommodating Federal Reserve environment offers potential buyers greater financing options to purchase vehicles.
3. China Stimulus: Although Tesla’s sales in China have faced challenges due to the country’s slowing economy, recent stimulus measures by Chinese officials are likely to have a beneficial impact on Tesla’s performance in the region.
Long-Term Catalysts for TSLA Stock
Energy Generation and Storage Insights
Tesla is also seeing impressive growth in its energy business, achieving a triple-digit compound annual growth rate (CAGR) over the last three years. While this area accounts for a small proportion of Tesla’s overall sales, its significant growth potential is noteworthy.
Robotaxi: A Future Game Changer
Some investors believe that Alphabet’s (GOOGL) Waymo’s robotaxi service has an advantage due to its operations in key cities like San Francisco. However, Tesla has the upper hand regarding data from its extensive training of the Full Self Driving (FSD) system, which it believes will be safer than human drivers.
Moreover, Tesla’s approach is more scalable than Waymo’s, which relies on costly lidar sensors. While both companies are well-positioned, it’s a misconception that Waymo will dominate the market simply because it started first.
Considering Tesla as a GARP Investment
In addition to strong growth expectations, Tesla offers a relatively low valuation compared to its historical norms, making it an attractive growth at a reasonable price (GARP) investment. TSLA’s price-to-sales ratio is at a historic low, reminiscent of pre-2020 levels before shares surged more than 20 times.
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Indications of a Strong Future for TSLA Stock
Earlier this year, TSLA shares surpassed a long-term downward trend on the quarterly chart, signaling a positive shift.
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Final Thoughts
Positive indicators suggest that Tesla is overcoming recent challenges. With anticipated growth ahead and a favorable valuation, the company looks set to resume its previous momentum.
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Interested in the latest recommendations from Zacks Investment Research? You can also download 5 Stocks Set to Double for free.
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Alphabet Inc. (GOOGL) : Free Stock Analysis Report
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The views and opinions expressed herein are solely those of the author and do not necessarily reflect those of Nasdaq, Inc.
