Historically, red has been associated with threats or dangers. Certainly, we’re seeing plenty of crimson in the markets recently. As I mentioned in a recent note to investors, it’s been 11 years since we’ve had a down day like Monday. Even transformative names like Tesla (NASDAQ:TSLA) suffered almost a 14% drop during the day’s session. But even though TSLA stock appears to have lost a gear, I’m still bullish.
I’ll go a step further. I believe this and perhaps the next several sessions represent a tremendously profitable entry point for the long term. Remember that red isn’t always symbolic of danger. It’s an alluring, exciting color as well — which is why Ferrari (NYSE:RACE) decks their exotics with a propriety scarlet sheen. They don’t call it “Ferrari red” for nothing.
And this is one of the reasons why I encourage investors to consider the bigger picture. Yes, red is dangerous, but it also spells opportunity. Back during the 2008 financial crisis, the markets suffered an unprecedented erosion in the modern era. I remember that time very well, with people were losing their minds — similar to what we’re seeing now.
However, that was also the time when contrarians who bought the lows experienced dramatic lifts in their portfolio years later. I believe the same is bound to happen to TSLA stock. Despite the current pain, you must focus on Tesla’s impact for tomorrow.
The future is getting greener, not darker. That said, here are three reasons why I’m exceedingly optimistic on TSLA stock.
Tesla Cuts Out the Mechanical Middleman
Whether you drive a Ford (NYSE:F), a Ferrari or any number of fossil-fueled cars, you’re always going to have to come in for service. That’s true even if you take meticulous care of your car. For instance, motor oil breaks down, whether through extensive use or time.
Beyond that, drive a traditional car long enough and you’ll eventually come across major repair bills. According to Toyota’s (NYSE:TM) website, a car typically has about 30,000 parts. Now, we all know about Toyota’s legendary reliability. But no matter how great they are, any one of those parts can fail over time. Certainly, some are critical, requiring expensive repair or replacement.
This is one of the reasons why Edmunds.com has a “True Cost to Own” calculator. Like a printer, it’s not just about the upfront cost but the constant ink you must purchase.
With Tesla cars, you essentially cut out this mechanical middleman. As a completely new paradigm, the company asks us to rethink the automobile. Gasoline? Obviously, you don’t need it. Oil changes? Nope. With Tesla cars only having about 20 parts to make it run, there’s not much that can go wrong. If it does, you don’t need to act like Indiana Jones to find the one part among tens of thousands.
This alone is a huge catalyst for TSLA stock.
TSLA Stock Benefits from Huge AV Lead
No, I’m not talking about in-car audio-video capabilities — although they’re top notch. Rather, I’m referring to Tesla’s automated vehicle (AV) technologies.
Previously the exclusive realm of science fiction, automated vehicles are steadily becoming a reality. As you know, Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) has an Other Bets business unit, where engineers focus on next-generation innovations. One such innovation is Waymo, Alphabet’s automated taxi service.
Thus, from an initial glance, it appears that Alphabet has the AV advantage. But the challenge that the internet and tech stalwart has is their simulations and less geographically diverse tests. Of course, it’s important to undergo as much testing as possible before launching an AV platform. However, where Tesla has an obvious advantage is in real-world testing across multiple platforms and settings.
For many years, Tesla has integrated and steadily improved its Autopilot platform. While it’s a driver aid as opposed to a pure, 100% AV experience, the development of extremely advanced sensor systems — which assist in steering, braking and acceleration — forge the foundation for a truly automated future.
With so many other automakers lagging Tesla on this and other technologies, TSLA stock has an easy, long-term runway.
Traditional Autos Playing Catch Up
Last year, Porsche (OTCMKTS:POAHY) made massive waves when it introduced the Taycan, an electric sports sedan. Naturally, it made waves because it represented the first real threat to Tesla’s electric vehicle dominance.
You have to realize not only the technical disruption that Tesla has achieved, but also the disruption in consumer sentiment. Prior to the company’s explosive growth, automakers experimented with hybrids. These were cute cars that may attract the specific types of drivers, but didn’t generate broad appeal.
However, Tesla EVs are downright gorgeous. They’re sleek, yet spartan, and perfectly embody the modern digital lifestyle. It’s no wonder the company has been killing it in sales.
Now, Porsche wants in, but I don’t perceive it as a threat. Instead, it’s a desperate realization that the traditional automakers are behind both the technical and consumer-sentiment curve. Undoubtedly, more automakers will react, offering their own EVs.
However, Tesla has long established first-market advantage. That will not be easy to give up, particularly as the company offers myriad customer options — ranging from the budget-friendly Model 3 to the higher-end Model X.
Therefore, I wouldn’t worry about TSLA stock. Once the growing pains and the broader market panic is over, the good times will quickly roll in.