Imagine investing your life savings into an electric vehicle company set to disrupt the entire automotive industry. Over the next few years, you watch your investment multiply 10 times over as this company grows to be worth over $1 trillion – exceeding all other automakers combined. Success story for the ages, right?
But suddenly, in a matter of months that same "can‘t lose" stock sheds half its value, obliterating over $500 billion in shareholder wealth along the way. Your jaw drops as you wonder, "what happened?"
This is the exact roller coaster ride Tesla investors have been strapped into lately. But context is everything in the stock market. By understanding the confluence of factors that triggered such a monumental rise and subsequent fall, we can decide if there is reason for optimism once the present storm passes.
I‘ve followed Tesla closely for years – let me explain to you exactly what‘s going on and where the company may go from here.
Tesla‘s Incredible Run – A Refresher
It wasn‘t long ago that Tesla was written off as overvalued and doomed. But the tides turned in 2020 and 2021 thanks to:
Burgeoning delivery figures – Tesla ramped Model 3/Y production as new factories opened. On a tear, they delivered over 936,000 vehicles in 2021, 87% more than 2020.
Luminous growth prospects – Analyst predictions of 50-65% annual growth until 2030 made Tesla a must-own growth stock.
Retail investor mania – Individual traders on Reddit fueled speculative frenzy.
Tesla became the ultimate momentum stock. Despite lingering doubters, shares rocketed to unseen heights with its valuation exceeding all automakers combined.
Key Tesla Stock Events
Jan 2020 - Reaches $100 billion valuation
Dec 2020 - S&P 500 inclusion surges stock to new highs
Oct 2021 - Exceeds $1 trillion market cap
Nov 2021 - Peaks at $414 all-time highBut this meteoric rise did not correlate with near-term financials, signaling investigable exuberance. A correction loomed.
The Wheels Start Wobbling
Cracks emerged in early 2022 amid a confluence of macroeconomic strife:
- Geopolitical instability – Russia‘s invasion of Ukraine roiled global markets
- Supply chain woes – Shortages sparked inflation and manufacturing delays
- Recession fears – Aggressive interest rate hikes stoked economic slowdown worries
Despite no company-specific troubles, the tide turned against riskier growth stocks. The +50% selloff year-to-date has sunk Tesla‘s share price near $200 – essentially wiping out 2 years of returns.
Tesla Key Stock Drivers
Bull Case | Bear Case
---|---
Rapid EV growth | Macroeconomic headwinds
Industry-leading margins | Stock was overvalued
Visionary founder | Distracted Musk
Adding fuel to the fire, CEO Elon Musk‘s chaotic $44 billion Twitter acquisition and spat with critics re-ignited worries that his attention is diverted from Tesla’s pressing needs.
Tesla Stock Chart
![TESLA stock chart shows sharp decline in 2022]Yet the business itself remains sturdy. Deliveries grew 42% annually last quarter while revenue topped forecasts. Profit margins continue besting other automakers.
Tesla Recent Financials
Metric | Q3 2022 | Year-over-Year
----------------- | ------------- |------------
Revenue | $21.5 billion | ⬆ 56%
Net Income | $3.29 billion | ⬆ 131%
EPS (adjusted) | $1.05 | ⬆ 69%
Vehicles Delivered | 344,000 | ⬆ 42%So this begs the question…
Is Today‘s Tesla Still Promising?
An old Wall Street adage goes "the stock market can remain irrational longer than you can remain solvent."
Macroeconomic troubles persist moving into 2023. But for the long-term investor, discounting Tesla stock near its 2-year lows could prove foolish.
Here‘s why:
Its lead in electric vehicles is still dominant – no other automaker comes close in EVs. With governments worldwide mandating EV adoption, Tesla remains at the forefront of an irreversible trend.
Fundamentals stayed strong despite stock collapse – unlike unprofitable tech names, Tesla prints cash while growing rapidly. The present beating leaves room for a recovery.
China and Berlin gigafactories scaling – made over 50% of Q3 deliveries internationally. Factories in the world‘s largest EV market secure growth.
If Tesla weathers the present storm, its stock could stage a violent recovery in the years ahead. For the risk-tolerant investor, anything near $200 per share carries life-changing upside if the company fulfills its mission of accelerating sustainable energy.
While a distracted CEO and challenging macroeconomy have sliced its stock price by over 50%, Tesla finds itself in a familiar role – left for dead as the fledgling upstart about to turn an entire global industry on its head. Given its history of proving critics wrong, I wouldn‘t bet against it in the long run.
This article does not constitute financial advice. Please conduct your own research before investing.
