Tesla (TSLA) stock ranks high on the list of the most-talked about companies on Wall Street. The company’s ability to innovate and its awe inspiring cutting-edge technology has catapulted it to become the dominant player in the electric vehicles (EV) market.
Add in its unique marketing strategy where it spends little-to-nothing yet created a strong brand position will continue to heighten the pressure on the competition, which doesn’t have these advantages. Having said all that, Tesla stock remains quite interesting. The shares closed Friday at $180.13. And, if you’re an investor, depending on your point of view, you're either overly excited or anxiously terrified. Perhaps you’re feeling both emotions at the same time.
Since reaching its 2023 high of $217.65 on February 16, shares have fallen as much as 25%, reaching a low of $163.91 on March 13. With the recent decline, including losing 13.5% of its value over the past thirty days, that’s part of the bad news, and thus the anxiousness some investors are likely feeling. These same investors who have held shares in electric vehicle maker over the past year are still down 38% during that time span, while the S&P 500 index is down only 11%.
But there’s also the glass-half-full perspective. Despite of all of that, Tesla shares are up 46% year to date, besting the 2% rise in the S&P 500 index, which might make a cohort of investors very excited about the opportunities ahead, even in the face of increased competition from the likes of EV startups such as Nio (NIO), Li Auto (LI), Rivian (RIVN) and Lucid (LCID). Tesla’s messaging to its competitors have been swift and fearless, lowering prices to boost its market share, and challenging other EV competitors follow suit.
The first price cuts were announced on Jan. 6, with cuts in China and key Asian markets. This was followed by cuts in both the U.S. and Europe, where the company made additional discounts on Model S and Model X prices as recent as March 5. Aside from its attempt to seize market share, Tesla is aiming to reach its delivery target of 50%. In 2022, the company’s unit sales came in at 40% compared to its 2021 total, selling 1.3 million vehicles.
Of the 1.3 million vehicles sold, the vast majority were the Model 3 sedan and Model Y crossover, while the high-end Model S and X vehicles made up the remainder. What’s more, the company’s Q4 delivery shortage might have also been a catalyst for the Tesla’s recent price cuts. Tesla delivered 405,278 vehicles to customers in the last three months of the year, and although that was an increase of 31% year over year, it missed the consensus estimates of 420,760 that analysts had forecasted.
Meanwhile, Tesla’s production ramp in Q4 yielded 439,701 vehicles, meaning production outpaced deliveries by 34,423 vehicles. Did that reveal weakening demand? The company likely believed so. Since the price cuts were announced, global demand has increased for Tesla Model 3 and Y vehicles. I suspect that the company’s growth trajectory is now in a far better place than when 2022 ended.
Tesla is set to report first quarter fiscal 2023 earnings in mid April. In the three months that ended March, Wall Street expects the company to earn 86 cents per share on revenue of $23.46 billion. This compares to the year-ago quarter when earnings came $1.07 per share on revenue of $18.76 billion. For now, while there are still some questions about Tesla’s first half 2023 results, namely gross margin improvement, the stock is now more attractive from a risk-versus-reward perspective.
The company’s increased focus on its growth strategy, namely production and profit margins, will be a key driver for the stock in 2023. My price target remains $250, which is roughly a 40% premium from current levels.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
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