Shares of Tesla (NASDAQ: TSLA) have been revving faster recently. Since the business reported well-received third-quarter results on Oct. 23, the electric vehicle (EV) stock has soared by 62% (as of Nov. 25). The market’s post-election bump has certainly helped as well.
However, Tesla shares still trade 15% below the peak they established about three years ago. If you’ve been watching it from the sidelines, is now finally the time to buy Tesla stock?
Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free »
By disrupting the automotive industry with its slick and technologically advanced EV models, Tesla has grown into one of the world’s most valuable companies, currently sporting a market cap of $1.1 trillion. For years, investors were drawn to its rapid growth. However, its gains have slowed down dramatically.
Tesla reported automotive sales of $20 billion in the third quarter. While that figure was up 2% year over year, it was 6% lower than the fourth quarter of 2022. Growth has been hard to come by.
One issue dragging on its sales could be higher interest rates, which make buying new cars less affordable. Tesla’s vehicles are already on the premium end of the spectrum, so greater financing costs are another speed bump buyers have to navigate.
Intensifying competition is also making things difficult for Tesla. It’s no longer the clear single leader in the EV market. It faces stiff competition from international players, notably in China. And in the U.S., legacy automakers like Ford and General Motors are pushing their EV lineups.
According to Wall Street analysts’ consensus estimates, Tesla’s revenue will increase at a compound annual rate of 12.4% between 2023 and 2026. That would certainly be a less robust result than it has achieved in the past.
Today, Tesla generates the bulk of its revenues from the sale of EVs, but its future could look vastly different. Eventually, it could be more of a software business that rakes in a high-margin recurring revenue stream from full self-driving (FSD) capabilities, asserts founder and CEO Elon Musk.
In early October, Tesla unveiled its CyberCab robotaxi. The ultimate goal is for the company to operate a worldwide fleet of them.
However, I still think there’s a lot of uncertainty around autonomous driving systems and whether or not they will be adopted on a grand scale. According to an early 2024 survey by AAA, 66% of drivers in the U.S. said they were fearful of self-driving vehicles, up from a 54% share who said the same thing in 2021. Even if Tesla can overcome the technical, legal, and regulatory challenges to wider full-self-driving adoption, hesitation about the technology among the general public may still get in the way.
Source link
