Investors who have held shares in electric vehicle maker Tesla (TSLA) over the past thirty days have begun to question that decision. TSLA stock has fallen more than 6% over the past month, which puts the stock in negative territory in the trailing twelve months, down 11.6% while the S&P 500 index has risen 13.8% over the past year.
Since the company reported its second quarter earnings, the stock has reversed almost 20%. Last week’s slights recovery kept the shares from falling 25%. But here’s the thing: On a year-to-date basis, TSLA stock has rewarded investors handsomely, surging 98.9%, while the S&P 500 index has risen just 17.6% year to date. The one-month dip was sparked by increased competition and fears of margins pressures the the price cuts might have. But there are still tons of reasons to expect Tesla stock to march higher.
First, the market has quickly forgotten the strong Q2 results the company provided, which showed impressive growth relative to last year’s figures. With the company producing 480,000 vehicles and nearly 466,000 delivered, Tesla produced 83% more vehicles and delivered 86% more than it did last year. To be sure, Tesla has been trimming prices since the start of the year, which impacted its quarterly margins. But the strategy of price cuts is aimed at boosting demand to support production levels. Notably, the price cuts didn’t hurt the bottom line as badly as some on Wall Street had feared.
What’s more, Tesla is poised to unveil the highly-anticipated launch of the Model 3 Highland, which is likely to drive higher deliveries in the second half of the year as it is rumored to be priced below the current Model 3. The company is also betting on its Full Self-Driving (FSD) software, which is posed to reenergize the company’s profit margins once it is fully operational. FSD will be the birth of the autonomous vehicle evolution. The platform is designed to automate Tesla vehicles so they can operate without a driver behind the wheel. Tesla’s FSD is at Level 3 automation (conditional driving automation), which means a driver should be engaged at all times. However, once FSD can navigate autonomously, it will not only boost Tesla’s profit margins, it will be a profit center of recurring revenues for Tesla through the company’s ambition for Robotaxis.
In that vein, the market is dismissing the potential for Tesla to license the FSD software to other EV makers. In other words, Tesla’s current competitors may become the company’s partners. Elsewhere, Tesla’s superchargers have essentially become the North American standard. Tesla has announced charging deals with both General Motors (GM) and Ford (F). Tesla’s charging port, which is on the North American Charging Standard (NACS) connector, will work for GM electric vehicles starting in 2025.
Tesla will report third quarter earnings in late October. In the three months that ends in September, Wall Street expects the company to earn 80 cents per share on revenue of $24.67 billion. This compares to the year-ago quarter when earnings came to $1.05 per share on revenue of $21.96 billion. For the full year, earnings are expected to decline 15.5% year over year $3.44 per share, while full-year revenue of $99.78 billion would rise 22.5% year over year.
Assuming a top and bottom line beat, and strong guidance for the the full year, the shares will start to rally. And if the company can talk up its supercharger network, energy business and AI-driven FSD path, Tesla…
Read More: Why It’s Time to Buy Tesla (TSLA) Stock