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Over the years, Tesla ((TSLA - Free Report) ) has shifted from developing niche products for affluent buyers to making affordable electric vehicles for the masses. Though there have been many naysayers along the way, shares have increased by more than 12,000%. Despite a brutal correction in 2022, the EV maker has delivered positive earnings surprises in nine straight quarters, and shares have begun to recover as a result.
Image Source: Zacks Investment Research
Below are five reasons the momentum can continue into year-end:
A Plethora of Catalysts
Price Cuts Sparking Demand: Over the years, Tesla CEO Elon Musk has often said that the EV maker has a supply problem, not a demand problem. However, in early 2023, Musk boldly cut prices to counter rising interest rates that are driving financing costs higher, compete with rivals, and allow several models to be eligible for the hefty $7,500 tax rebates for electric vehicles. (Allowed on EVs under 55,000 and electric SUVs and trucks under $80,000).
Stock Repurchase Plan: Apple ((AAPL - Free Report) ) is the best example of using buybacks to its advantage. AAPL has the most aggressive share repurchase plan on Wall Street, and the success of the strategy is undeniable. Stock buybacks increase earnings per share (The total number of shares outstanding decreases), create a favorable imbalance between supply and demand (Publics supply of shares is lower), and imply that the stock is undervalued and that it expects future growth. In Tesla’s recent earnings calls, Elon Musk suggested that the company would do a “meaningful buyback” in the fourth quarter of 2023.
A Hummer Replacement? In the early 2000s, General Motors ((GM - Free Report) ) saw a wave of success with its best-selling Hummer SUV. The eccentric army truck became popular with people from all walks of life who wanted to stand out on the roads. However, during the 2008 financial crisis, the viability of the Hummer came into question. Not only was the economy working against it, but sky-high oil prices also made its gas-guzzling nature unattractive, and the green movement in the United States was beginning and consumers were looking to decrease their carbon emissions. Later this year, Tesla will launch its “Hummer killer,” the obnoxious-looking Cybertruck. The Cybertruck SUV is unlikely to run into the same issues the Hummer did for two reasons. First, unlike in 2008, 2023’s economy is not on the brink of collapse. If you use the Tesla Model Y SUV sales as a precedent, consumers are not only attracted to EVs, but also willing to pay a premium. Second, because the Cybertruck is fully electric, it will attract environmentally conscious consumers.
Full Self-Driving (FSD) Deployment: Tesla continues to refine and improve its AI-powered self-driving program. Already, FSD is much safer than the average driver on the road. In a recent interview, Musk seemed very bullish on FSD’s potential, saying “Tesla will have a Chat-GPT moment later this year.” Musk should know – he was the brains and investment behind Open AI’s Chat-GPT.
Electrifying “Non-Automotive” Growth: Over the last few years, Tesla’s energy generation and storage revenues have been growing at a CAGR of 47%. Tesla’s “Megapack” deployment is expected to rocket higher by 135% in 2023.
Valuation
Price to Sales at Bargain Basement Levels: Because of Tesla’s dominance in the EV realm, innovation, and high growth, it garners a higher valuation than traditional automakers such as Honda Motor Company ((HMC - Free Report) ) and Ford ((F - Free Report) ). That said, from a price-to-sales perspective, TSLA is at its most attractive level since the start of the post-pandemic recovery on Wall Street. The last time Tesla’s P/S ratio was at 8 (like it is now), shares increased sevenfold over the next several months.
Image Source: Zacks Investment Research
Financial Efficiency
Return on Equity: Typically, automakers are known for having razor-thin margins. For Tesla, this isn’t the case. Tesla’s return on equity of 27.29% is higher than the S&P 500’s 25.67% over the trailing twelve months.
Image Source: Zacks Investment Research
The “Magic Elixir”
Growth and Liquidity: Large institutional growth investors consider two major factors when selecting stocks: growth and liquidity. Tesla has grown its top and bottom lines at a healthy double-digit rate for years all while having a market cap north of $500 billion – an extremely rare feat.
Image Source: Zacks Investment Research
Long-Term Area of Interest
A Rare Technical Zone: In monster stocks, the 50-week moving average is a long-term level that investors often defend. Tesla has held the zone since its inception in 2010 and is making a rare visit.
Image Source: Zacks Investment Research
Tesla also jumped above its 200-day moving average for the first time since 2022 – another bullish sign.
Image Source: Zacks Investment Research
Conclusion
A plethora of catalysts, a bargain basement valuation, financial efficiency, growth and liquidity, and strong technical action are key reasons why Tesla’s stock should be higher 6-12 months from now.
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5 Reasons to Buy Tesla Now
Over the years, Tesla ((TSLA - Free Report) ) has shifted from developing niche products for affluent buyers to making affordable electric vehicles for the masses. Though there have been many naysayers along the way, shares have increased by more than 12,000%. Despite a brutal correction in 2022, the EV maker has delivered positive earnings surprises in nine straight quarters, and shares have begun to recover as a result.
Image Source: Zacks Investment Research
Below are five reasons the momentum can continue into year-end:
A Plethora of Catalysts
Price Cuts Sparking Demand: Over the years, Tesla CEO Elon Musk has often said that the EV maker has a supply problem, not a demand problem. However, in early 2023, Musk boldly cut prices to counter rising interest rates that are driving financing costs higher, compete with rivals, and allow several models to be eligible for the hefty $7,500 tax rebates for electric vehicles. (Allowed on EVs under 55,000 and electric SUVs and trucks under $80,000).
Stock Repurchase Plan: Apple ((AAPL - Free Report) ) is the best example of using buybacks to its advantage. AAPL has the most aggressive share repurchase plan on Wall Street, and the success of the strategy is undeniable. Stock buybacks increase earnings per share (The total number of shares outstanding decreases), create a favorable imbalance between supply and demand (Publics supply of shares is lower), and imply that the stock is undervalued and that it expects future growth. In Tesla’s recent earnings calls, Elon Musk suggested that the company would do a “meaningful buyback” in the fourth quarter of 2023.
A Hummer Replacement? In the early 2000s, General Motors ((GM - Free Report) ) saw a wave of success with its best-selling Hummer SUV. The eccentric army truck became popular with people from all walks of life who wanted to stand out on the roads. However, during the 2008 financial crisis, the viability of the Hummer came into question. Not only was the economy working against it, but sky-high oil prices also made its gas-guzzling nature unattractive, and the green movement in the United States was beginning and consumers were looking to decrease their carbon emissions. Later this year, Tesla will launch its “Hummer killer,” the obnoxious-looking Cybertruck. The Cybertruck SUV is unlikely to run into the same issues the Hummer did for two reasons. First, unlike in 2008, 2023’s economy is not on the brink of collapse. If you use the Tesla Model Y SUV sales as a precedent, consumers are not only attracted to EVs, but also willing to pay a premium. Second, because the Cybertruck is fully electric, it will attract environmentally conscious consumers.
Full Self-Driving (FSD) Deployment: Tesla continues to refine and improve its AI-powered self-driving program. Already, FSD is much safer than the average driver on the road. In a recent interview, Musk seemed very bullish on FSD’s potential, saying “Tesla will have a Chat-GPT moment later this year.” Musk should know – he was the brains and investment behind Open AI’s Chat-GPT.
Electrifying “Non-Automotive” Growth: Over the last few years, Tesla’s energy generation and storage revenues have been growing at a CAGR of 47%. Tesla’s “Megapack” deployment is expected to rocket higher by 135% in 2023.
Valuation
Price to Sales at Bargain Basement Levels: Because of Tesla’s dominance in the EV realm, innovation, and high growth, it garners a higher valuation than traditional automakers such as Honda Motor Company ((HMC - Free Report) ) and Ford ((F - Free Report) ). That said, from a price-to-sales perspective, TSLA is at its most attractive level since the start of the post-pandemic recovery on Wall Street. The last time Tesla’s P/S ratio was at 8 (like it is now), shares increased sevenfold over the next several months.
Image Source: Zacks Investment Research
Financial Efficiency
Return on Equity: Typically, automakers are known for having razor-thin margins. For Tesla, this isn’t the case. Tesla’s return on equity of 27.29% is higher than the S&P 500’s 25.67% over the trailing twelve months.
Image Source: Zacks Investment Research
The “Magic Elixir”
Growth and Liquidity: Large institutional growth investors consider two major factors when selecting stocks: growth and liquidity. Tesla has grown its top and bottom lines at a healthy double-digit rate for years all while having a market cap north of $500 billion – an extremely rare feat.
Image Source: Zacks Investment Research
Long-Term Area of Interest
A Rare Technical Zone: In monster stocks, the 50-week moving average is a long-term level that investors often defend. Tesla has held the zone since its inception in 2010 and is making a rare visit.
Image Source: Zacks Investment Research
Tesla also jumped above its 200-day moving average for the first time since 2022 – another bullish sign.
Image Source: Zacks Investment Research
Conclusion
A plethora of catalysts, a bargain basement valuation, financial efficiency, growth and liquidity, and strong technical action are key reasons why Tesla’s stock should be higher 6-12 months from now.