Shares of the electric vehicle (EV) giantTesla Inc. TSLA have faced a tumultuous journey recently, battling margin pressure, fierce competition, and stagnant business growth. However, a stroke of luck seems to have graced Tesla, with its stock boldly surging 44.7% over the past month (as of Jul 5, 2024), soaring to a six-month high.

Although the recent stock price leap is substantial, Tesla’s shares have endured a 6.7% decline in the past year, even earning the title of one of the worst-performing S&P 500 stocks earlier this year. Yet, a potential comeback story is on the horizon, prompting investors to ponder whether it’s the opportune moment to bet on Tesla.

Let’s dig a bit deeper.

Tesla Sets New Q2 Delivery Record

In early July, Tesla unveiled record-breaking deliveries for the second quarter of 2024, surpassing expectations. These numbers signal a rise in demand that could alleviate concerns about inventory surplus for its leading models, Model 3 and Model Y.

The EV pioneer dispatched 443,956 vehicles (comprising 422,405 Model 3/Y and 21,551 other models) globally in Q2 2024. While this figure marks a 4.8% dip from the previous year, it outperformed the anticipated 436,000 deliveries according to analysts.

Notably, the declining year-over-year sales mirror the intensifying competition in the electric vehicle sphere. The sluggish pace of EV sales has spurred investors to seek enhanced profitability per car sold. Tesla rolled out 410,831 vehicles (including 386,576 Model 3/Y and 24,255 other models) during the quarter.

Tesla’s Innovation in AI Realm

Transitioning from a conventional car manufacturer to a tech and robotics entity, Tesla is at the helm of innovation, focusing notably on artificial intelligence (AI) and autonomous driving technology. With a substantial bet placed on driverless software and AI, the company is eyeing a sales revitalization.

On August 8, Tesla is slated to introduce “robotaxis” – autonomous vehicles devoid of a steering wheel or pedals. This next-gen offering is deemed critical for the electric carmaker’s sustenance amid escalating competition in the EV sector.

In a significant move in late April, Tesla’s CEO Elon Musk announced an approximate $10 billion expenditure for AI training and inference this year. Tesla’s dedicated push towards AI and autonomous driving is viewed as potentially transformative amidst the current AI fervor.

Tesla Awaits Enhanced Profit Margins?

Prophecies by analysts like Morningstar Inc.’s Seth Goldstein portend improved profit margins for Tesla, buoyed by reduced production and raw material costs as cited on Bloomberg. Goldstein anticipates the company’s resurgence to profit growth in the upcoming year.

Projections indicate a 35.08% growth for Tesla next year compared to the expected growth rate of 24.50% for the Automotive – Domestic industry and 9.31% for the S&P 500. Over the next five years, Tesla is forecasted to grow at a rate of 21.60% versus the industry’s 15.40% growth rate.

EV Space Embarks on Steady Upward Trajectory

Electric vehicle sales maintained a robust stature in the first quarter of 2024 with a 25% year-over-year growth. Since 2021, first-quarter electric car sales have consistently comprised 15-20% of the total global annual sales, per IEA.

The lion’s share of first-quarter sales escalation this year originated from China, with Chinese EV sales predicted to surge by nearly 25% in 2024, followed by a projected 20% growth in the United States, according to an IEA report.

Of notable mention is the substantial growth in emerging EV markets in the first quarter, witnessing over a 50% sales surge, signifying a swift global transition towards electric mobility. IEA forecasts a 20% year-over-year escalation in EV sales for 2024, with EVs expected to capture over one-fifth of total car sales.

Navigating Potential Hurdles

Changes in political landscapes, including prospective policy shifts under the Trump administration if victorious in the November election, introduce uncertainty in the EV sector as pro-fossil fuel agendas gain momentum. Additionally, Tesla’s Cybertruck, its primary new consumer model in recent years, has struggled to garner traction.

The Bloomberg Electric Vehicles Price Return Index mirrors a challenging year for EV stocks, as manufacturers grapple with monetary crises. Some analysts and fund managers advocate for industry consolidation and enhanced profitability before the sector stabilizes according to a Bloomberg feature.

Conversely, the prospect of tariff conflicts under the Trump administration looms, with potential hefty levies on Chinese EV entities expected in the event of a win, which could position Tesla favorably.

Deciphering Technical Signals

Recent indicators show Tesla’s 14 Day SMA crossing above its 50 Day SMA, indicating short-term bullishness. Furthermore, the Parabolic SAR signals a positive outlook for the Tesla stock in the short run.

However, caution is advised for the longer term, given the Tesla stock’s relative strength index hovering at 80, a level deemed overbought. In essence, Tesla appears favorable for short-term plays, although sustained success may necessitate further time. Tesla currently holds a Zacks Rank #3 (Hold).

Exploring ETF Opportunities

Investors seeking to capitalize on Tesla’s short-term uptrend may consider ETFs with substantial exposure to this premium automaker, leveraging the ETF approach to mitigate company-specific concentration risks. Notable ETFs in this realm include Direxion Daily TSLA Bull 1.5X Shares TSLL, MeetKevin Pricing Power ETF PP, Consumer Discretionary Select Sector SPDR Fund XLY, Simplify Volt Robocar Disruption and Tech ETF VCAR, and ARK Innovation ETF ARKK.