Source: PaxForex Premium Analytics Portal, Fundamental Insight
The electric vehicle (EV) market is struggling, as investors have shifted their focus away from growth stocks and are looking for safer places to put their money.
But completely ignoring the electric car market could be a huge mistake, and ignoring Tesla's leadership in this segment could be a particularly bad decision. That's why Tesla stock is worth buying right now.
While younger EV companies are still trying to figure out how to increase production, Tesla's production levels are probably the envy of its smaller competitors.
Tesla, for example, produced 305,407 cars in its most recent quarter, a 69 percent increase over the year-ago quarter. The electric-car maker is also quickly getting those cars into the hands of customers, with deliveries reaching 310,048 vehicles this quarter, a 68 percent increase over last year.
These numbers are a record for the company in terms of vehicle shipments and production, and they came at a time when production in China was stalled due to COVID-19-related blockages.
By comparison, Rivian said it could only produce 25,000 electric cars this year (down from a previous forecast of 50,000) because of supply chain problems. Lucid Group also cut its 2022 production targets from 20,000 cars to 13,000 for the same reason.
Some older automakers have also found the transition to EV production more difficult than they expected. Toyota recently recalled its first production of electric cars -- just 2,700 units -- less than two months after their release.
The bottom line is that while competition is certainly growing, Tesla has shown that it is doing better than some of its competitors at producing electric cars.
Tesla's car sales revenues are growing rapidly, reaching $16.9 billion in the first quarter, an 87 percent increase over last year. This growth has been driven by impressive growth in vehicle production and shipments.
In addition to the growth in sales, the company is making more profit from its vehicles. In the first quarter, the auto industry's gross profit rose 132% to $5.5 billion.
As a result, the EV company's non-GAAP net income exceeded $1 billion for the first time in the quarter.
It would be one thing if Tesla's stellar quarter was a one-off, but it wasn't. The company believes it has a "reasonable chance" of increasing vehicle production by another 60 percent this year over 2021.
Part of that optimism is due to the fact that the company's Shanghai plant is "coming back with renewed vigor," according to Tesla CEO Elon Musk after production was cut last year due to the COVID-19 virus-related shutdown.
In addition, Tesla's newest plants in Germany and Texas were only launched in March and April. Tesla is still overcoming some production difficulties at these two plants, and Musk recently said that these plants are now "losing billions of dollars" due to supply chain problems. However, both plants are expected to increase production significantly this year, and Tesla did not change its previous statement that it would increase car production by 60 percent this year, which would be about 1.5 million cars.
Like many other stocks during the pandemic, Tesla's stock price rose sharply and then cooled during the market sell-off. As a result, the stock price of the electric car market leader is down 38 percent from a year ago.
Part of this drop in the stock price is because Tesla investors are worried that Musk is distracted by his Twitter purchase. And while Tesla investors certainly have a lot to watch out for, it doesn't change the fact that Tesla's car production is growing rapidly and revenues and profits are increasing.
Sure, there could be a lot of volatility in the stock price in the short term. But given that Tesla's early moves in the EV industry have already paid off, and the company is well ahead of younger EV start-ups, its stock could remain a great long-term play in the EV space, especially at today's favorable price.
As long as the price is above the 705.00 level, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 735.44
- Take Profit 1: 795.00
- Take Profit 2: 890.00
Alternative scenario:
If the level of 705.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 705.00
- Take Profit 1: 630.00
- Take Profit 2: 575.00
