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Is It Time to Buy Tesla (TSLA) Stock?

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Tesla (TSLA - Free Report) has seen its stock price climb over the last month as the rest of the market fell on the back of the continued tech selloff, driven by the likes of Apple (AAPL - Free Report) , Amazon (AMZN - Free Report) , and other FAANG stocks. Now let’s see why Tesla stock seems like a strong buy amid the current market uncertainty as the electric car power looks ready to speed up production and profitability.  

Overview

Tesla impressed investors when it posted quarterly revenues that soared 128% from $2.98 billion in the year-ago quarter to hit $6.82 billion. This blew away our Zacks Consensus Estimate and also marked 70% growth from Q2.

At the bottom end of the income statement, Tesla swung from a loss of $2.92 per share in the year-ago quarter to report adjusted earnings of $2.90 per share on the back of improved automotive gross margins and reduced operating expenses.

 

 

Plus, Tesla’s Model 3, which hit weekly production of 4,300 units, was the best-selling car in the U.S. in terms of revenue in Q3, beating out Toyota (TM - Free Report) , Honda (HMC - Free Report) , and Ford (F - Free Report) . Elon Musk’s company delivered 56,065 total Model 3s at a starting price of $49,000. Looking ahead, Tesla remains committed to bringing down the cost of the Model 3 to its mass-market goal of $35,000.

Price Movement

Shares of TSLA have surged roughly 30% in the last month. Meanwhile, the S&P 500 dipped 4%. Tesla stock is up roughly 9% since the start of the year, compared to the index’s marginal decline. However, we should note that this includes come major turbulence.

Shares of TSLA closed regular trading Wednesday down 2.7% to $338.19 per share. This marked a roughly 12% decline from its 52-week high of $387.46 per share.

 

Outlook

Looking ahead, Musk plans to remain hands on in the electric car firm’s production push and noted that he will walk the Model 3 line on November 27 and 28. Musk wrote in an email last week that all assembly areas need to be able to support making 1,000 cars per day. “If you can’t see a way to get there, please let me know as soon as possible, so that I can help solve for this outcome,” Musk wrote. “This is extremely important for our prosperity.”

Clearly, production rates are paramount, and they will be for the foreseeable future. On top of that, Tesla still has some looming debt concerns. But the firm seems like it will eventually raise the money it needs by selling more stock.

Investors would be harmed in the short-term. This, however, will likely prove completely necessary in order for Tesla to reach its long-term goals.  

In the near-term, our current Zacks Consensus Estimate is calling for Tesla’s Q4 revenues to skyrocket 113% to $7.01 billion. Meanwhile, Tesla’s full-year revenues are expected to surge 81% to reach $21.30 billion.

Earnings Trends

Moving onto the bottom end of the income statement, Tesla is projected to report adjusted Q4 earnings of $2.13 per share, which would mark a 170% climb from the year-ago quarter’s loss of $3.04 per share. Tesla is still expected to report a full-year loss of $1.25 per share. However, it is projected to post adjusted earnings of $4.74 per share in fiscal 2019.

Plus, the charts below show us how much better Tesla’s earnings outlook appears following its strong Q3 performance and improved guidance.  

 

Bottom Line

Tesla’s earnings estimate revision activity over the past 30 days helps it earn a Zacks Rank #1 (Strong Buy). TSLA sports an “A” grade for Growth in our Style Scores system. Tesla also plans to bring the Model 3 to Europe early next year, where it noted the mid-sized premium sedan market is more than twice as large as it is in the U.S.

And let’s not forget that the electric vehicle revolution has barely started.  

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