- Tesla’s (TSLA) recent earnings victory is, to a certain extent, being overshadowed by headlines about CEO Elon Musk.
- Meanwhile, some anxious traders might worry about Tesla’s seemingly high market valuation.
- Investors should filter out the noise, focus on the hard data and consider holding Tesla shares.
Electric vehicle (EV) manufacturer Tesla (NASDAQ:TSLA) is widely known as a market leader. TSLA stock is worth holding even if you’re concerned about the company’s valuation, as Tesla’s results justify a long position.
There’s no need to be distracted by the flashy headlines about Tesla CEO Elon Musk. Will he buy this or that company? Is he buying another altcoin? What’s he tweeting today? These questions can turn our attention away from an opportunity that’s sitting right in front of us.
Musk is an intriguing individual — no doubt about that. Yet, instead of focusing on the man and the persona, informed investors can choose to weigh the benefits of owning TSLA stock as the EV revolution continues in the 2020s.
The best question to ask, then, is whether Tesla deserves its recently acquired $1 trillion market capitalization. The answer depends on your outlook on EVs, and on Tesla’s ability to lead while other clean-energy automakers play catch-up.
What’s Happening With TSLA Stock?
Not long ago, TSLA stock hit $1,000 … again. Even after the stock previously reached $1,000 and Tesla enacted a share split, the buyers pushed the stock price right back up.
Clearly, there’s a group of devoted investors who just can’t get enough of Tesla. Along the way, some value-focused traders stayed on the sidelines due to concerns about valuation — yet, they missed out on a financial windfall.
Sometimes, you just have to respect a stock’s momentum. Instead of focusing on Tesla’s price-to-earnings ratio and other similar traditional metrics, just consider the freight train that is TSLA stock. Anyone who’s dared to short-sell it for an extended period of time, only got run over by the Tesla train.
All of this has taken place despite a number of challenges. These include supply chain bottlenecks, a Covid-19-related shutdown at Tesla’s Shanghai factory, high U.S. dollar inflation and so on. Time and time again, Tesla broke through those roadblocks and delivered supreme shareholder value, while also contributing to a cleaner Earth.
But hey, let’s not get ahead of ourselves. There’s no point in holding TSLA stock at $1,000+ unless the company is capable of generating revenue and turning a profit. So, what does the data tell us about this?
If you’re going to follow the headlines about Tesla, it’s best to focus on the ones that point to hard fiscal data. After all, the right data can help us make the right investments.
How did Tesla fare in its recent earnings release? New Street Research analyst Pierre Ferragu tweeted, “I am already speechless.” This should give you an indication of just how well Tesla did during 2022’s first quarter.
According to Tesla’s financial update document, the company’s total quarterly revenue grew 81% year-over-year to $18.8 billion. Contributing factors included growth in vehicle deliveries, increased average selling price and growth in other parts of Tesla’s business.
Regarding the company’s profitability, Tesla shared, “Our operating income improved to $3.6B in Q1, resulting in a 19.2% operating margin.” This impressive result was achieved despite “rising raw material, commodity, logistics and expedite costs” as well as an “increase in operating expenses.”
In the wake of these results, Ferragu wasn’t the only Wall Street expert with concise but generally positive commentary. Thus, Wedbush analyst Dan Ives called Tesla’s quarterly results “Cinderella-like,” while Cowen analyst Jeffrey Osborne dryly stated, “We commend the execution.”
What You Can Do Now
Maybe you agree with the $1,000 TSLA stock price and Tesla’s trillion-dollar market capitalization, or maybe you don’t. Either way, the stock is likely to propel forward and make the short sellers regret their positions.
As the EV movement continues throughout the 2020s, Tesla will remain a force to be reckoned with. Along the way, Musk will keep things interesting and entertain onlookers, which is fine, but not always relevant.
Informed investors can choose to stick to the fiscal facts and the important data points. On that basis, TSLA stock is worth holding as the momentum of both the company and the stock are likely to persist for a long time.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.