Tesla Inc (NASDAQ:TSLA) is like few other stocks on the market. The electric vehicle market pioneer is a face of innovation, but simultaneously draws the ire of many investors.
Why? Because its a money-losing operation with a highly leveraged balance sheet. The company has also developed a nasty reputation for consistently pushing back operational targets.
But money-losing operations come with the territory for hyper-growth operations. The leverage is being used to fuel sustainable, huge market share growth. And the pushing back of operational targets is just near-term noise in an otherwise healthy long-term narrative.
In other words, the bearish arguments against TSLA stock seem unnecessarily short sighted. Meanwhile, the bullish argument that this is tomorrow’s biggest electric car company in an electric-dominated world, seems much more accurate.
Consequently, I say buy TSLA stock for the long haul. This is a stock that has huge upside potential over the next 5-10 years.
TSLA Technicals Look Good
The technicals on TSLA stock look strong right now.
Ever since dropping to $300 in early December, TSLA stock has put in higher lows and higher highs to form a solid uptrend. Right now, the stock looks like its near the top-side of that uptrend, so a near-term pullback may be coming. But the longer-term uptrend looks really good.
Meanwhile, the stock’s 200-day exponential moving average (EMA) is finally starting to slope upward again after being flat since November. The 200-day EMA starting to inflect upward after a period of being flat is usually a sign that this stock is on the verge of a multi-month breakout.
Also, the 20-day EMA has crossed bullishly above the 50-day EMA. That is notable. The 20-day EMA failed to break convincingly above the 50-day EMA back in December 2017, but now the 20-day is solidly above the 50-day for the first time since September/October 2017. Again, this specific golden cross pattern of 20-day breaking above 50-day is usually a sign that TSLA stock is on the verge of a breakout.
All in all, the technicals look solid on TSLA stock. TSLA may have a small pullback here, but the uptrend looks solid.
And its supported by strong fundamentals.
Fundamental Growth Narrative Is Only Gaining Momentum
I’ve said it before and I’ll say it again: TSLA stock is a pure-play on the electric vehicle revolution. With multiple countries setting multi-year carbon emission reduction targets and multiple companies pouring billions of dollars into the production of electric vehicles, the EV revolution isn’t a matter of “if”. It’s a matter of “when”.
“When” is pretty soon. Moody’s thinks battery electric vehicles will represent 7-8% of global new vehicle sales by the mid-2020s and 17-19% by 2030 (versus less than 1% currently). That is a huge ramp in a short period of time.
Moody’s isn’t the only one who is bullish on the EV revolution. AutoNation, Inc. (NYSE:AN) CEO Mike Jackson thinks that global mandates will drive EV sales to account for 20% of all vehicle sales by 2030. Analysts at Bank of America Merrill Lynch predict that EVs will account for 40% of all vehicle sales by 2030. PwC thinks that by 2030, 55% of all new vehicles may be electric cars.
Across the board, mostly everyone agrees: the electric vehicle revolution is coming.
TSLA is the face of this revolution. Granted, other traditional auto manufacturers are pouring big money in the EV game, but TSLA was here first and maintains the highest brand equity in the EV market.
Consequently, as long as this revolution continues to unfold and TSLA continues to innovate in the market (see the semi-truck), TSLA stock will trend higher, regardless of Model 3 production hiccups.
Yes, Model 3 production is abysmally slow right now. But production of the Model X and Model S were also abysmally slow at one point. Eventually, TSLA figured out the production bottlenecks on those cars, and now, the company is shipping more than 25,000 Model S and Model X vehicles per quarter.
Bottom Line on TSLA Stock
This is a long-term growth stock with huge upside potential as the electric vehicle revolution unfolds over the next decade.
Buying now and holding for the long haul seems like the right move.
As of this writing, Luke Lango was long TSLA.