Tesla (NASDAQ: TSLA) has made its CEO, Elon Musk, the richest man on the planet, thanks to a stock price that has gained over 1,100% in the last two years. Regardless of his wacky social media presence and his unconventional approach to business (Technoking, seriously?), the man is a rock star with designs of launching more vehicles in the coming years. That and the world’s legitimate attempt to reduce greenhouse emissions is the reason why Tesla is the one EV stock I’m buying right now.
A look at Tesla’s financials
Tesla’s stock price has continued to soar and is up over 30% year-over-year (YoY). Its latest quarterly report (Q3 2021) offers insight as to why. Revenue for its automotive division is up 58% YoY and that includes a drop of 30% in payments from regulatory credits. Total gross profit is up 77% in the same time period and gross margins rose by 308 bp. Finally, EPS surged by over 430%.
Tesla’s rise has been nothing short of meteoric, with its market cap exceeding a trillion dollars recently. This allows the company to keep adding factories to its existing four and scaling to deliver more vehicles.
What I like about Tesla
Tesla uses technology to improve its EV, automated vehicle (AV), and insurance offerings. With its collection of over 100 million miles of driver data, the company is in an enviable position to design an optimal AV. Additionally, its ongoing data collection is used to monitor and advise drivers on how to improve their safety to lower insurance premium costs. And although the insurance division is still in its infancy at Tesla, analysts estimate it to generate over $35 billion in revenue by 2030.
This innovation and strong brand recognition allowed Tesla to deliver 241,300 vehicles in its last quarter, setting a new company record. All in the midst of a global microchip shortage.
Risks to Tesla’s share price
It’s no secret that Tesla is grossly overvalued and analysts are predicting a stock price drop off of anywhere between 40% to as high as 90% when the market chooses to correct. Competition is also a big concern as Volkswagen, Nio, and Rivian continue to gobble up market share and newcomers like Lucid motors will take a stab at claiming the luxury EV market.
Tesla’s growth potential
With Tesla no longer depending on emissions credits to stay profitable, I feel the company has only scratched the surface in the EV market. Along with the highly anticipated Cybertruck, the company also plans on releasing a Semi for businesses, and an SUV and van for consumers. But I feel the real bread and butter will come when Tesla launches its lower-priced ($25,000) EV that will no doubt encourage adoption from traditional drivers.
Contributing Writer at MyWallSt
David fell in love with the stock market in 2000 after making $30,000 overnight on Techniclone. His favorite stocks today are Netflix, Google, Amazon, and Apple as they are the market leaders in their sectors and are safe long-term investments.