Out of the realm of contenders in the electric vehicle (EV) industry today, one standout reigns supreme: Tesla (NASDAQ: TSLA). Amid the frenzy of companies vying for a slice of the market, Tesla stands as a towering colossus, setting an almost unattainable benchmark for its competitors.
Despite recent fluctuations in its stock price, fueled by speculations of CEO Elon Musk retracting plans for a budget-friendly model, Tesla remains an unparalleled prospect for astute long-term investors. Let’s scrutinize the reasons behind Tesla’s towering success in the EV landscape and why the present is an auspicious moment to leverage this investment.
Image source: Tesla.
The Reign of Tesla in the EV Realm
In the vision of analysts, it is anticipated that by 2030, 2 out of every 3 vehicles sold globally will be electric. This profound growth potential has attracted a horde of traditional automakers and startups to the field. Nonetheless, amidst the apparent competition, the spotlight still unequivocally shines on Tesla.
When it comes to production, Tesla takes an undisputed lead. The company manufactured over 1.84 million vehicles in 2023, marking a 15% edge over its closest rival, BYD. Yet, Tesla’s true magic lies in its capacity to slash costs and amplify profits, manifesting in a per-vehicle profit of $8,200, a benchmark almost 5 times higher than BYD.
Bolstered by robust profits, Tesla amasses a considerable income stream and boasts a formidable cash reserve of $29 billion. This financial robustness solidifies its standing as an enduring force in the industry.
While competitors undergo consolidation, Tesla’s strong financial footing empowers it to invest in operations and scale up manufacturing capabilities. With new production facilities sprouting like mushrooms, including one in Mexico and potentials in India and Thailand, Tesla is strategically positioned to etch its name as the paramount EV manufacturer globally for the foreseeable future.
Expanding Horizons: Tesla’s Multifaceted Vision
Tesla’s supremacy in the EV domain is cast in stone, guaranteeing a lion’s share of the benefits from the escalating adoption trends. However, the true zenith of its potential unfolds when contemplating its forays beyond EVs. From artificial intelligence and self-driving robotaxis to humanoid robots and revolutionary energy solutions, Tesla stands as a maestro of technological innovation.
The quantification of the net impact of these nascent technologies remains a conundrum due to the absence of viable markets for many of them. Nonetheless, a groundbreaking simulation by Cathie Wood’s Ark Invest endeavors to unveil the ramifications of a robotaxi fleet. The simulation, conducted using a Monte Carlo approach, offers a spectrum of Tesla’s potential stock price based on the revenue and income generated by robotaxis.
The outcomes proved jaw-dropping. Averaging the myriad scenarios, Ark Invest postulates that a robotaxi fleet could contribute close to half of Tesla’s revenue, propelling its total revenue beyond $1 trillion, almost decupling its present figures. In this utopian scenario, a Tesla share could surge to $2,000, as per Ark’s projections.
While the Ark analysis isn’t gospel truth, it starkly delineates the transformative impact of Tesla’s developmental ventures. While quantifying the revenue streams from robotaxis or humanoid robots remains knotty, one thing is certain – the returns are bound to be substantial.
Seizing the Fortuitous Investment Window
Despite its laurels as a cornerstore of investment portfolios, Tesla’s stock has weathered a noticeable downturn in 2024, shedding over 30% since the year’s commencement. The prime suspect behind this predicament points to escalating interest rates and languid growth, driving up the cost of car ownership and squeezing Tesla’s profit margins.
This downtrend found validation in Tesla’s Q1 2024 production update, unveiling a 20% slump in total sales compared to the prior quarter. It marked the first instance since 2020 that Tesla recorded a decline in year-over-year sales.
Candidly addressing the scenario, Tesla’s management foresees 2024 as a lackluster year for the company and the EV sector at large. Notwithstanding, Tesla’s robust financial standing places it in a sturdy position to navigate through this transient turbulence with poise, unlike other counterparts like Rivian Automotive, which grapple with operating losses.
Elucidating further in an earnings call, Tesla’s management depicted the current juncture as a transitional phase between two robust growth cycles — the prior cycle ushered by the Model Y’s ascendancy as the global bestseller, catapulting Tesla to the apogee of automakers. The imminent growth trajectory hinges on the launch of its robotaxi fleet (slated for a debut on Aug. 8) and the brainchild humanoid robot, Optimus.
The recent slump in Tesla’s stock value presents a tantalizing opening for investors with a protracted investment horizon. By seizing this moment, investors position themselves to ride the crest of Tesla’s innovation-driven future. As the EV domain traverses metamorphoses and Tesla’s futuristic creations materialize, the company remains poised to clinch its dominance, making it the quintessential EV investment destination with a mere $1,000.
Where to Allocate $1,000 Now
When our analysts break their silence on a stock, ears ought to perk up in attention. This is justified as the newsletter they fostered for two decades, Motley Fool Stock Advisor, has surpassed the market performance by a commendable margin.*
They’ve recently unveiled their picks for the 10 best stocks to purchase at present… with Tesla making it to the coveted list alongside 9 other undervalued gems.
*Stock Advisor returns as of April 8, 2024