Is Tesla A Good Stock To Buy?

One of the biggest manufacturers of battery-powered vehicles worldwide is Tesla. With the introduction of the Model S and Model X, the business transformed from a start-up to a well-known premium automaker in less than ten years. With its Model 3 and Model Y vehicles, it plays in the entry-level luxury midsize car and crossover SUV markets. Over the coming years, Tesla stock also intends to offer new vehicles, such as a light truck, a semi truck, a sports car, and an affordable sedan and SUV. As EVs transition from a niche market to widespread consumer acceptance, Tesla seeks to keep its position as the market leader. Tesla established two new factories in 2022 to increase its production capacity and satisfy the escalating demand.

Tesla Stock Purchase Advantages:

Tesla’s cost advantage and limited economic moat are supported by its intangible assets. While the company can produce its vehicles more cheaply than its rivals thanks to its expertise in EV manufacturing, its strong brand cachet as a luxury automaker demands premium pricing. Because we anticipate the company to keep innovating to stay ahead of both new and established rivals, Tesla’s brand cachet is not likely to be compromised anytime soon. Tesla‘s competitive edge is based on intangible assets, which includes its proprietary technology. Due to its manufacturing scale, we believe Tesla enjoys a cost edge in the production of EVs. Legacy automakers are gradually switching from ICE to BEV production, but we anticipate that they will continue to bear the costs associated with ICE for a very long period.

Estimated Fair Value for Tesla Shares

The share price we assess to be fair is $220. A weighted average cost of capital of just under 9% is what we employ. Our stock valuation includes convertible debt that is non recourse and non dilutive. Our estimate makes the assumption that by 2031, Tesla will have delivered a total of about 5.1 million vehicles annually. This includes fleet purchases, which represent a growing market for Tesla. Despite being significantly less than management’s aspirational target of selling 20 million vehicles by the end of this decade, our estimate is still nearly four times the 1.31 million vehicles that will be delivered in 2022. We believe Tesla will succeed in lowering its manufacturing expenses on a per-vehicle basis going forward.

Tesla Conventional Automakers

For Tesla, there are many different possible scenarios. If mass-market consumers don’t embrace the new powertrain technology due to higher costs and worse function, electric vehicles may continue to be a niche market. Other powertrain systems may also have an impact on electric vehicles. Due to its high degree of cyclicality, the car industry is susceptible to sudden drops in demand. Customers may have more options and view Tesla less favorably as conventional automakers and new entrants increase competition in the EV market. The company is spending a lot of money on capacity expansions, which run the danger of being delayed and costing more than expected. In an effort to keep its technological edge, the company is also investing in R&D, though there is no assurance that these investments will be successful.

Tesla Believers

With its technology for EVs, autonomous cars, batteries, and solar generation systems, Tesla has the potential to upend the automotive and power generation sectors.

As Tesla lowers unit production expenses over the coming years, its profit margins might increase.

Tesla provides the finest functionality of any EV on the market thanks to the union of its unique supercharger network and sector-leading technology.

Due to the significant investments being made in EV development by conventional manufacturers, Tesla may lose market share and experience a slowdown in its sales growth.

Government programs like regulations and subsidies, which will impede Tesla‘s long-term market expansion, are the main drivers of EV usage.

Don’t hold your breath hoping for the suffering to end any time soon, as shown by the company’s fourth quarter delivery totals. The company’s shares experienced their biggest intraday drop on Tuesday, falling as much as 15% to a new 52-week low of $104.64. What justifies the punishment? In the final three months of the year, the business delivered 405,278 vehicles to customers, falling short of the 420,760 consensus estimate that analysts had predicted.

Tesla Production Capacity:

The delivery failure raised more questions about the degree of competitive demand pressure that Tesla has started to experience despite the fact that it is ramping up production capacity at its various plants. And it hasn’t helped that many analysts think CEO Elon Musk will be stretched too thin because of his acquisition of Twitter, where he currently serves as CEO, to get Tesla back on track. The stock’s price targets were swiftly lowered by these same Wall Street experts, giving Tesla its lowest average 12-month target price since October 2021.

Stein did, in fact, lower his price estimate for the shares from $348 to $299. However, that still implies potential premiums of 166% from current levels of about $112. The CEO of the flagship Ark Innovation ETF (ARKK), Cathie Wood, has maintained a positive stance on Tesla. Over 175,000 shares of Tesla were purchased by the asset manager with an emphasis on innovation through two of her actively managed ETFs. As Tesla has hit new 52-week lows, Wood and her staff have been actively buying the stock over the past month, picking up nearly 400,000 shares between December 16 and the end of 2022.

Conclusion:

Tesla has been one of the hottest stocks on the market, with investors eager to get a piece of the action. To answer this question, we took a look at how much a Nissan Altima weighs. By understanding the weight of a Nissan Altima, we were able to see how well the car holds up and how well it performs on the road. With this in mind, we have concluded whether or not Tesla is a good stock to buy. Read on to find out what our conclusion is!

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