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Tesla (NASDAQ:TSLA) stock has been an investor favorite for several years, often leading the market in trading activity.
The stock is up 81% in 2023, as investors hope the worst is over for inflation, rising interest rates, and a host of other issues.
As a long-term shareholder in Tesla, I’ve seen how the stock can perform in good times and bad. Many fear that Tesla shares are overhyped, leading to a very large price-to-earnings (P/E) ratio of 52. This is hard to argue with when compared to competitors. GM in 5.7 times, and Ford at 4.6x.
Because of their steep growth rate, analyzing a company like Tesla can be challenging. A discounted cash flow calculation shows Tesla’s share price of $207.46 is 34% above its fair value of $154.78.
However, I prefer to focus on the company’s own performance. I have three main reasons why I am excited for what Tesla has in store.
Product development
Tesla is naturally synonymous with electric vehicles (EVs). However, one of my favorite features to see with the company is its extensive product line in various sectors. Tesla has EV manufacturing, energy generation, batteries, insurance, robotics, and AI as current and potential revenue streams.
Many areas are in the early stages of development, but look promising. By developing high-quality products, solving some of the biggest challenges we face, such as climate change and energy security, Tesla clearly has an untapped customer base. As production costs drop, and manufacturing capacity increases at an incredible pace, the future looks bright.
competitive edge
It’s clear that EVs will play a big role in future transportation. Almost all legacy automakers are making this change, but Tesla has a major advantage. Instead of adapting, companies have implemented it from day one.
Factories are becoming leaner and purpose-built for EVs. The team is highly skilled, and the global infrastructure is growing rapidly. Tesla recently announced that it had delivered 422,875 vehicles in the first quarter.
This strategy results in tremendous economies of scale, and flexibility in pricing. When inflation rises, Tesla chooses to cut prices. With the demand for EVs on the rise, and numerous government incentives making these more affordable, choosing Tesla for a fossil fuel vehicle is getting more and more appealing.
Investors and customer enthusiasm
There are few growth stocks with Tesla’s level of enthusiasm. Investor events have a party atmosphere, and Tesla’s controversial CEO Elon Musk is more famous than the head of the business.
Despite the recent decline, retail investors continue to buy more Tesla shares. The acquisition of Twitter, and economic and geopolitical uncertainty have all weighed on the company, but investors have largely held firm. With a loyal following, and the hope that the customers who bought the first Tesla will stick around, the high price is less of an issue for me than the company wants.
What’s next?
I’ve been holding Tesla stock since 2018, and it won’t be long before that changes. Volatility remains in the share price, but I see a quality company with all the necessary factors for success. If Tesla can expand into new areas, and manufacturing costs continue to fall, I believe there is still growth in Tesla stock ahead.
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