After reaching its zenith in 2021, the trajectory of Tesla’s stock has hit choppy waters. Once soaring above $400 per share, it has undergone a tumultuous ride over the last three years, currently hovering around the $185 mark. For those early investors, it’s been a profitable journey. But for those jumping on the bandwagon more recently, fortunes might not be as bright. The burning question now lingers – has the prime time to invest in Tesla passed?
Image source: Getty Images.
Unpacking Tesla’s Descent
The decline in Tesla’s stock can be largely attributed to a diminishing gross-profit margin. At its peak, Tesla boasted margins exceeding 30%, leading the auto industry by a wide margin. However, these figures have waned to 17%, facing squeezes from multiple angles. This decline is partly due to a faltering demand for electric vehicles, catalyzed by rising interest rates adding to the cost of ownership. In an attempt to spur demand, Tesla slashed prices in 2023. The resultant effect of this, coupled with escalating costs across supply chains and labor markets, caused margins to spiral downward.
But as the tides of interest rates ebb, and the cyclicality of EV demand re-emerges, there is hope on the horizon. Projections hint at an impending decrease in interest rates by the year’s close, potentially rejuvenating consumer appetites for EVs.
Moreover, Tesla stands to bask in the glow of the global surge in EV adoption, with governments worldwide enacting strict emissions regulations and offering incentives to promote EV purchases, setting a fertile ground for Tesla’s long-term prosperity.
A New Chapter for Tesla
Tesla is not just about EVs anymore. A pivotal focus presently is on developing autonomous vehicles and laying the groundwork for a robotaxi enterprise. Perceptible progress has been made in Tesla’s self-driving technology, set for a global demonstration of its robotaxi on Aug. 8. Beyond autonomous vehicles, Tesla is gearing up to unveil its humanoid robot, Optimus, to the market by 2025. Though these initiatives are still in their nascent stage, Tesla’s strides are notable. Optimus’ deployment in Tesla factories underscores its potential to bolster efficiency and slash labor costs across diverse industries.
Embracing Optimism
Skeptics raise red flags about Tesla’s track record with deadlines, yet history suggests otherwise, hinting at its aptitude to ultimately deliver. If Tesla replicates its triumphs in EVs with its forays into robotaxis and Optimus, the company could witness a transformative evolution, reshaping not just itself, but potentially society as well. Though the monetary impact of these innovations remains hard to gauge in a non-existent market, projections indicate a whopping $700 billion annually from robotaxis and $1 trillion from Optimus. Should these numbers materialize, Tesla’s revenue would more than triple from its current standing.
In a leap of faith, I remain optimistic about Tesla’s future, harping on the belief that its zenith is yet to come. Tesla’s prowess in innovation and technology boundary-pushing has been a cornerstone of its success thus far. If it sustains its leadership in the EV sector while successfully diversifying into autonomous vehicles and robotics, the sky’s the limit for the company.
Deliberating on a Tesla Investment
Before diving into Tesla stock, it’s crucial to ponder on this:
The Motley Fool Stock Advisor analysts have unearthed what they deem as the 10 best stocks for investors to dive into now… and Tesla isn’t among them. These chosen stocks are anticipated to yield substantial returns in the years ahead.
Reflect on the instance when Nvidia entered this elite list on April 15, 2005… investing $1,000 back then based on our recommendation could have blossomed into $757,001!*
Stock Advisor furnishes investors with a roadmap to success, offering insights on portfolio construction, regular analyst updates, and two fresh stock picks monthly. The service has eclipsed the S&P 500’s returns by more than fourfold since 2002*.
*Stock Advisor returns as of June 24, 2024
RJ Fulton has positions in Tesla. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.