With high inflation and rising interest rates, electric vehicle (EV) companies have experienced significant pullbacks from recent valuation highs. Even after a run of explosive increases to begin 2023, the stock of industry leader Tesla (NASDAQ:TSLA) is down nearly 55% from its peak. It’s time to load up on shares before the giant EV maker stock rises more.
Tesla stock has tremendous upside potential
To be sure, Tesla stock has enjoyed a spectacular start to the year. Shares are up 55%, while competitors are struggling to gain traction. Yet if the company can maintain its exceptional rate of growth, its stock may have more space to run.
Tesla’s revenue has really risen from $21.5 billion in 2018 to $81.5 billion in 2022. More impressively, it has proven its ability to achieve economies of scale. Tesla’s operational income increased from negative $253 million to $13.8 billion between the aforementioned years. Investors may be wary about the company’s ability to maintain its current pace. Tesla, however, aims to increase vehicle sales by 50% each year in the long run.
Tesla just reduced the cost of two of its most expensive vehicles
According to Tesla’s website, prices for the Model S and Model X variants have dropped by 4% to 9%. The price cuts follow another price cut in January that slashed up to 20% off the beginning price.
Elon Musk, chief executive officer of Tesla, stated last week that decreased prices have contributed to increased interest in automobiles.
“We found that even small changes in the price have a big effect on demand,” Musk said during the company’s investor day.
The performance versions of both vehicles were also reduced in price, with the Model S Plaid lowering 4% to $109,990 and the Model X Plaid decreasing 8% to $109,990.
Tesla has stated that it is striving to reduce the cost of its next generation of automobiles by half. The company has yet to reveal the next vehicles and has stated that further information would be released at a later date.
“Affordability is what matters,” Musk said during investor day. “As you make the car more affordable, we’ll have demand go crazy.”
With a high rate of growth combined with the increase in profitability brought about by size and mastering the learning curve, Tesla’s earnings might skyrocket over the next decade. Could is the essential word here. There is a chance that Tesla will be stymied by competition, declining consumer demand, and self-inflicted wounds. Individual investors must decide whether they are willing to ride this volatile stock for the long haul. Investors have enthusiastically fastened on their seatbelts based on the valuation of Tesla stock; the company has a forward price-to-earnings ratio of 50.5.
Tesla is the clear industry leader in the EV space, and the fact that it is growing sales at an outstanding rate while already being significantly profitable suggests that it has a far lower risk profile than other smaller EV upstarts. So, for me, Tesla stock is a buy this month.