Skip to main content

Should You Invest in Tesla Right Now? – The Motley Fool

Many investors may feel they have missed the boat with Tesla (TSLA -0.13%). While the stock has been up over 1,800% in the last three years, it has dropped more than 25% since early January. That shouldn’t be too much of a surprise, however, with the stock valued for much success coming into this year. 

But investments should be made looking forward, not back. Tesla, and the EV sector in general, is entering a new phase, and the company is positioning itself to continue to lead the way forward. While returns over the coming years may not match prior results, Tesla has a lot of irons in the fire. It’s worth looking closely at whether now is a good time to invest. 

Black Model S showcased with red, white, and black lights.

Image source: Tesla.

Expanding product lineup

The second quarter was a challenging one for Tesla. Global supply chain snarls and rising raw material costs particularly impacted its two new factories that are in the midst of ramping up in Texas and Germany. Production at its Shanghai factory, as well as consumer demand, was hindered by lockdowns as China continued to implement its zero-COVID policy. 

But with all those headwinds, Tesla still grew second-quarter sales by 42% year over year and generated $621 million in free cash flow. That’s not bad for what constituted a tough quarter. And the company is making headway in growing its product portfolio. CEO Elon Musk said the Tesla Semi truck would begin deliveries as soon as this year, and the Cybertruck pickup model should still be on track to launch next year, too. Beyond that, a lower-priced EV is expected to be added to its product portfolio as it reduces costs. 

Tesla’s energy segment is also ramping up production. Its gigafactories haven’t just increased battery production to support Tesla’s vehicle manufacturing growth. The company has been increasing production of battery storage and solar systems that it sells separately to customers. The below chart shows the comparable growth in the first six-month periods of the years since 2019. In its second-quarter report, the company said it continues to ramp up Megapack storage production as customer interest “remains strong and well above our production rate.”

bar graph showing battery storage and solar deployments for the first six month periods of 2019 through 2022.

Data source: Tesla. Chart by author.

Roadway ahead

One crucial negative for investors has always been the company’s valuation. If, as analysts believe on average, one assumes earnings in the back half of 2022 are 50% higher than the first half, Tesla stock is trading at a price-to-earnings (P/E) ratio of about 75 based on this year’s earnings. 

But the company is working to bring costs down. In a recent investor conference, Tesla head of investor relations Martin Viecha said Tesla’s cost per vehicle was $84,000 in 2017 and has dropped to $36,000 per vehicle more recently. Continuing that trend will allow Tesla to get into the lower-priced EV market that should help create mass penetration for the EV sector. 

The company recently filed documents saying it is evaluating the potential to build a lithium hydroxide refining facility on the gulf coast of Texas. That would be another way to streamline its supply chain and control costs. The company said commercial operations could begin by the fourth quarter of 2024 if the project moves forward. 

That could also help Tesla benefit from incentives included in the Inflation Reduction Act. The new law already gave Tesla a boost, as it resumes some tax credits that had expired for consumers buying new EVs. Tesla was well past the previous limitation that ended those credits after a manufacturer sold more than 200,000 vehicles. Lower-priced vehicle models and more of its supply chain based in the U.S. will also help it meet eligibility requirements. 

The future certainly looks bright for Tesla. While a P/E above 70 is an extremely high valuation, if the company continues to grow at or near 50% for several more years, that won’t seem so rich. For investors looking years or decades down the road, buying Tesla right now could make good sense. 

Howard Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.

Techyrack Website stock market day trading and youtube monetization and adsense Approval

Adsense Arbitrage website traffic Get Adsense Approval Google Adsense Earnings Traffic Arbitrage YouTube Monetization YouTube Monetization, Watchtime and Subscribers Ready Monetized Autoblog



from Investing – My Blog https://ift.tt/jsOQbN8
via IFTTT
Labels:

Comments

Post a Comment

Popular posts from this blog

These money and investing tips can give you a smooth ride in a rough market – MarketWatch

Don’t miss these top money and investing features: Sign up here  to get MarketWatch’s best mutual funds and ETF stories emailed to you weekly! INVESTING NEWS & TRENDS How to approach rebalancing your portfolio for 2023 It’s not a good idea to rebalance your portfolio at preset intervals Read More Bonds aren’t more attractive than stocks even as yields register a 15-year high The S&P 500’s return is similar when the 10-year Treasury yield is high or low. Read More Here’s who’s been trading crypto, and how they’re doing A new study finds that most people who entered the cryptocurrency market have lost money — and that those people are young men. Read More BlackRock sees these thematic ETFs potentially outperforming in 2023 In this week’s ETF Wrap, MarketWatch spoke with BlackRock’s Jay Jacobs on investing themes he likes for 2023 as investors worry about a slowing economy and monetary tightening. Read More Three seasonal effects in the stock market begin around T...
Post a Comment
Read more

Four months until SACSCOC visits Auburn: Four things you might not know about SACSCOC – Office of Communications and Marketing

Notice body There’s less than four months remaining until Auburn University’s accrediting body, the Southern Association of Colleges and Schools Commission on Colleges, or SACSCOC, arrives for its on-site visit. As the Accreditation team prepares for the on-site phase of the reaffirmation process, we want to share four things you might not know about SACSCOC: 1. SACSCOC is self-governed by the accredited institutions SACSCOC’s Principles of Accreditation requires a model of shared governance of its member institutions and holds itself to the same standards. The Commission on Colleges is operated by the SACSCOC Board of Trustees. The 77 Board members are elected by the College Delegate Assembly, or CDA, which is comprised of one voting representative from each of the 780 SACSCOC-accredited institutions. Each representative is the president or other chief executive of their respective college or university. In other words, the election of SACSSCOC’s leadership is in the hands of its ...
Post a Comment
Read more

5 YouTube features to use to boost engagement – Sprout Social

When you want to explore a new hobby or learn something new, where do you go? The answer is probably “YouTube.” The second-most popular social platform has come a long way since the “Charlie bit my finger” days. And new YouTube features are making it even more beneficial to marketers and creators—YouTube Shorts topped 1.5 billion monthly users in just two years. With 51% of consumers anticipating YouTube will be one of the social media platforms they use most this year, it’s a digital space your audience most likely uses. But with 500+ hours of content uploaded to YouTube every minute, high popularity also means high competition. Whether you’re new to YouTube or conducting a YouTube audit , using some of these features can help you stay ahead, grow your audience and give your channels a boost. 5 free YouTube features you need to use more often To help your audience find your videos in YouTube and Google search alike, you need to use the right tools. From underused YouTube sear...
Post a Comment
Read more