Portfolio Watch: Tesla's Promising Outlook Amid Market Uncertainties: An Overview | June 22, 2023
Tesla's growth trajectory continues to appear promising, despite its current valuation at 52 times next year's earnings. This confidence is primarily driven by the company's expected 75 percent year-over-year growth and the anticipated third-quarter launch of the #Cybertruck. Furthermore, Tesla's ongoing investment in AI and its intention to license its #Dojo supercomputer next year could significantly broaden its business horizons.
The potential for Tesla's stock to reach all-time highs is contingent on several factors, including a turnaround in earnings estimates that have been dropping throughout the year due to pricing adjustments in the first quarter. However, a boost in the second quarter gross margins, particularly for the truck, combined with stable pricing and increased consumer excitement around the Cybertruck, could signal a major turnaround.
The introduction of new products has historically driven interest and investment in the Tesla brand. This is evidenced by the introduction of the Model-Y in 2020, which resulted in a seven-fold increase in stock value, far outpacing NASDAQ's 50 percent growth. Similar outcomes are predicted with the introduction of the Cybertruck.
Consideration must also be given to Tesla's collaborations with industry giants like #GM and #Ford. These partnerships reinforce Tesla's dominant industry position and can further amplify its growth. Taking these factors into account, it appears that the stock projections for 2024 are likely 70-80 cents too low.
There are, however, economic concerns that could impact Tesla's growth, such as potential rate increases from the Federal Reserve. Such increases could potentially lead to a recession, posing a significant risk to Tesla's prospects. Despite these concerns, optimism about Tesla's future remains, with anticipation around the impact of the Cybertruck, solid pricing strategies, and lucrative partnerships with GM and Ford.
Regarding potential future price cuts for Tesla cars, no significant reductions are anticipated in the next six to twelve months. This is due to high demand, particularly for the Model Y, which is now the best-selling car in the US. Gross margins are expected to hit their lowest point in the second quarter, with a gradual increase predicted thereafter. Additionally, the conversion of the #EV tax credit to an instant rebate next year will likely enhance the attractiveness of Tesla's offerings.
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