It goes without saying that Tesla (NASDAQ:TSLA) is in a slump.
As I anticipated, the company’s much-anticipated AI Day 2022 (held on Sept. 30) failed to give TSLA stock even a modicum of a boost. Instead, the latest developments with the electric vehicle maker have pushed shares lower lately.
Shares have started to bounce back, after hitting a new 52-week low, but the stock is still down around 20% over the past month. With this pullback, if you’ve been a longtime Tesla investor, you may be thinking now’s the time to cash out.
If you’ve yet to add it to your portfolio, you may be thinking twice about whether now’s the time to do so.
Yet before you decide to sell or skip on this former high-flier, you may want to keep one thing in mind. Near-term challenges notwithstanding, the long-term bull case remains intact.
| TSLA | Tesla | $225.62 |
Negative News Has Sent TSLA Stock Sputtering
There’s been a mix of positive and negative with Tesla news this month. However, analysts and investors have focused more on the latter than the former. For example, the reaction to Tesla’s third-quarter vehicle delivery numbers.
The EV maker may have reported a record number of deliveries (343,000), but this figure failed to hit analyst forecasts, which called for around 359,000 deliveries. The release of these numbers kicked off this latest TSLA stock sell-off starting on Oct. 3.
Throughout the month, shares continued to slide. The company’s latest quarterly results failed to renew bullishness. Although Tesla beat on earnings ($1.05 per share, versus analyst consensus of $1 per share), revenue ($21.5 billion) fell short of estimates ($22 billion). The market was also underwhelmed by Tesla’s gross vehicle margins for the quarter.
Besides the latest numbers, something else has played a role in the stock’s sell-off throughout this month. Tesla’s slashing of prices in China is being perceived to be a possible sign the company is having trouble moving vehicles in its largest overseas market.
While investors may have digested Q3 results, this factor could continue to weigh on shares in the near term.
End of the Road? Not Quite
In light of recent news, it may seem as if there’s even more to bolster the bear case for TSLA stock, formulated by its skeptics. That is, as the company’s growth begins to make a severe deceleration, this richly-priced stock will fall to a significantly lower valuation.
But while Tesla is facing a few near-term challenges, don’t assume shares have hit the end of the road when it comes to future price appreciation. There’s still much in play that will enable the company to sustain, then grow, its valuation.
For starters, while the latest numbers have underwhelmed, growth continues to come in at a strong pace. Sales last quarter were up nearly 56% year-over-year.
Earnings were up more than 94% compared to the prior year’s quarter. Adoption of EVs is expected to keep climbing in the United States, thanks in large part to incentives and funding provided by the Inflation Reduction Act.
Concerns about growth in China may be overblown. In time, price cuts could prove to be a shrewd offensive move, rather than a concerning defensive move. On a longer timeframe, there are also several avenues Tesla can pursue to “level up” on its success.
The Verdict on TSLA Stock
As InvestorPlace’s Samuel O’Brient reported on Oct. 26, Ark Invest’s Cathie Wood, a longtime fan of this stock, is again pointing out there’s still an untapped opportunity for Tesla: lower-priced vehicles for the mass market.
While Wood’s argument that this could increase Tesla’s total addressable market by tenfold may be a bold prediction, the introduction of less-expensive models may enable a sustaining of elevated growth for years to come.
Don’t forget that the company’s innovations in the area of artificial intelligence, on full display at AI day, are also something that may ultimately get this stock back into the “Trillion Dollar Club.”
For now, TSLA stock (which currently earns a B in Portfolio Grader) could keep sputtering. Yet as there’s still plenty on the table to keep it in high-growth mode, if you’ve been waiting to buy, now may be the time to do so.
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.
