Tesla (NASDAQ: TSLA) investors find themselves navigating a complex landscape this year. While competition in the electric vehicle (EV) market was expected, a significant slowdown in EV demand has taken many by surprise. However, in the third quarter, the leading EV manufacturer finally reported a rise in vehicle sales once again.
Nearly 463,000 vehicles were delivered in Q3, representing a 6.4% increase compared to the previous year. Despite this growth, the company faces challenges in surpassing 2023’s overall EV sales goal. CEO Elon Musk informed investors that he aims for an average annual growth rate of about 50% in the coming years. As a result, stakeholders are left to consider how Tesla will continue to justify its high stock valuation. Insights from this week’s robotaxi event provided a glimpse into Musk’s strategy.
The Broader Tesla Business
Tesla’s focus extends beyond just cars. While the EV sector is indeed its main source of profit, the market has assigned the company a valuation that exceeds its current profits. With a recent price-to-earnings ratio surpassing 60, investors are betting on future growth. Nevertheless, recent trends indicate a possible stagnation in EV sales growth.
In contrast to its EV business, Tesla’s auxiliary enterprises are on an upward trajectory. The company’s global Supercharger network now boasts nearly 6,700 locations and over 60,000 charging stalls. Additionally, Tesla has reached agreements with several automotive companies that will provide access to this well-established network.
The energy division is also progressing rapidly. In the last two quarters, Tesla produced 16.3 GWh of energy storage products, surpassing deployment levels from the previous year. During a recent earnings call, Musk emphasized that investors who don’t believe in the company’s ability to achieve full self-driving technology should reconsider holding its stock. This left shareholders eager for details at the robotaxi event held last week.
Updates from Tesla’s Robotaxi Reveal
Reactions to the robotaxi event among Tesla investors were mixed. With millions of cars on the road collecting data through the company’s advanced driver-assistance systems, many anticipated significant revelations. Instead, the presentation lacked any data that might alleviate regulatory concerns or prove an edge over competitors. Currently, opinions suggest that Tesla is lagging in self-driving technology compared to rivals such as Alphabet‘s Waymo, which has amassed over 20 million miles of driverless data.
Following the event, Tesla’s shares experienced a decline. This dip, along with any future ones, could present opportunities for investors to acquire shares. Tesla’s efforts in self-driving technology should not be underestimated. With data being collected from millions of vehicles regarding driver behavior and performance in “driverless” conditions, the company is building a robust foundation.
However, the decline in stock prices can also be attributed to the absence of solid timelines. Musk has set ambitious goals in the past, yet he indicated plans to begin production of the newly introduced “Cybercab” by 2027. Additionally, fully unsupervised self-driving capabilities are expected to roll out next year in California and Texas for Model Y and Model 3 vehicles.
Investor concerns were raised over the 2027 timeline, with many hoping for the launch of an affordable sub-$30,000 EV to attract a larger market. Nevertheless, long-term investors should remain optimistic, even if the more budget-friendly model is still a few years away.
Tesla is concentrating on developing self-driving software as a key revenue stream for its future. Whether that revenue comes from the cost-effective Cybercab or current Tesla owners opting for additional full self-driving software, it is likely to enhance profitability moving forward. Investors with $1,000 to invest and a long-term perspective might consider this recent stock drop an opportunity to add Tesla shares.
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Suzanne Frey, an executive at Alphabet, serves on The Motley Fool’s board of directors. Howard Smith holds positions in Alphabet and Tesla. The Motley Fool has investments in and recommends Alphabet and Tesla as well. Please refer to the Motley Fool’s disclosure policy for more information.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.