Tesla Stock: A Comprehensive Analysis for Potential Investors

Is Tesla Stock a Buy? | The Motley Fool

Tesla's (TSLA 2.99%) stock has awakened. Shares have erupted for a 50% gain over the past few weeks after a long slide that dates back to last year. The reason? Tesla's second-quarter deliveries pleased Wall Street, while excitement builds for the company's upcoming Robotaxi event in August. The stock is famously polarizing because investors must balance the company's present fundamentals with potential game-changing future catalysts. Tesla's ambitious goal-setting has helped drive remarkable long-term investment returns. The stock's recent rally started with Tesla's quarterly delivery numbers. Tesla delivered 443,956 vehicles in Q2, several thousand units above the consensus Wall Street estimate. However, the delivery beat comes with some important caveats. Tesla's deliveries technically beat estimates, but analysts had already lowered the bar in anticipation of a weak number. Tesla delivered a shockingly low number in Q1: just 386,810, down from 484,507 in Q4 2023, the prior quarter. So yes, the delivery number was better than feared, but it was still less than the 466,140 units delivered in Q2 a year ago. There are reasons to be excited about long-term EV growth, including Cybertruck, Semi, and unannounced models in development. However, the stock's reaction seems to imply that Tesla's deliveries blew the door off the hinges, and it objectively didn't. Ideally, Tesla will follow up this quarter with incremental delivery growth in Q3 and Q4 to instill confidence that its EV business is back on an upward trajectory. Investor excitement over Tesla's artificial intelligence (AI) prospects is arguably driving the stock higher now. The company has two potentially game-changing catalysts on the horizon in Robotaxi (self-driving vehicle technology) and Optimus, a humanoid robot. Elon Musk believes Optimus alone is worth trillions of dollars in incremental value to Tesla. The company's Robotaxi event is set for Aug. 8, which could explain why the stock is sprinting higher less than a month before the event. There's no denying the potential these technologies possess. Famous Tesla analyst and investor Cathie Wood believes Robotaxi could represent 90% of Tesla's business and drive the stock to $2,600 per share by 2029. Who knows what exactly Tesla will unveil, but it might be worth exercising caution. For as much as Musk and Tesla have accomplished over the years, there is a clear history of missing deadlines. Elon Musk unveiled the Cybertruck in late 2019, with a 2021 launch date. However, Tesla only began delivering its first deliveries in late 2023, and the total delivered is still small, lumped in with the other vehicles column in the Q2 data. Musk has been setting timelines for full self-driving since the mid-2010s, and it's still not done. That's not to say Robotaxi and Optimus aren't coming; it's just that investors should keep expectations grounded. One could argue that Tesla's investment thesis has always been more about future expectations than firm, present-day financials. But that becomes harder to swallow as the stock's valuation rises. Today, Tesla is trading at over 100 times its estimated 2024 earnings. Analysts estimate Tesla's earnings will grow by an average of 22% annually for the next three to five years. That could easily change if Tesla reveals that Robotaxi or Optimus will be monetizable sooner rather than later. That said, investors are probably better off waiting for firm evidence than taking any announcements at face value. While 22% annualized-earnings growth is strong, it doesn't justify a price-to-earnings (P/E) ratio over 100. That's a price/earnings-to-growth (PEG) ratio over four, which implies that investors buying Tesla are paying through the nose for its anticipated growth. The market's sentiment could turn south if it becomes clear that Tesla's AI products are further down the road than hoped. Consider waiting for a better-buying opportunity or dollar-cost averaging to counter some of the volatility.

Is Tesla Stock a Buy?

Tesla's (NASDAQ: TSLA) stock has awakened. Shares have erupted for a 50% gain over the past few weeks after a long slide that dates back to last year. The reason? Tesla's second-quarter deliveries pleased Wall Street, while excitement builds for the company's upcoming Robotaxi event in August. The stock is famously polarizing because investors must balance the company's present fundamentals with potential game-changing future catalysts. Tesla's ambitious goal-setting has helped drive remarkable long-term investment returns. The stock's recent rally started with Tesla's quarterly delivery numbers. Tesla delivered 443,956 vehicles in Q2, several thousand units above the consensus Wall Street estimate. However, the delivery beat comes with some important caveats. Tesla's deliveries technically beat estimates, but analysts had already lowered the bar in anticipation of a weak number. Tesla delivered a shockingly low number in Q1: just 386,810, down from 484,507 in Q4 2023, the prior quarter. So yes, the delivery number was better than feared, but it was still less than the 466,140 units delivered in Q2 a year ago. There are reasons to be excited about long-term EV growth, including Cybertruck, Semi, and unannounced models in development. However, the stock's reaction seems to imply that Tesla's deliveries blew the door off the hinges, and it objectively didn't. Ideally, Tesla will follow up this quarter with incremental delivery growth in Q3 and Q4 to instill confidence that its EV business is back on an upward trajectory. 2. AI excitement comes with fine print Investor excitement over Tesla's artificial intelligence (AI) prospects is arguably driving the stock higher now. The company has two potentially game-changing catalysts on the horizon in Robotaxi (self-driving vehicle technology) and Optimus, a humanoid robot. Elon Musk believes Optimus alone is worth trillions of dollars in incremental value to Tesla. The company's Robotaxi event is set for Aug. 8, which could explain why the stock is sprinting higher less than a month before the event. There's no denying the potential these technologies possess. Famous Tesla analyst and investor Cathie Wood believes Robotaxi could represent 90% of Tesla's business and drive the stock to $2,600 per share by 2029. Who knows what exactly Tesla will unveil, but it might be worth exercising caution. For as much as Musk and Tesla have accomplished over the years, there is a clear history of missing deadlines. Elon Musk unveiled the Cybertruck in late 2019, with a 2021 launch date. However, Tesla only began delivering its first deliveries in late 2023, and the total delivered is still small, lumped in with the other vehicles column in the Q2 data. Musk has been setting timelines for full self-driving since the mid-2010s, and it's still not done. That's not to say Robotaxi and Optimus aren't coming; it's just that investors should keep expectations grounded. 3. It is hard to justify the stock's valuation One could argue that Tesla's investment thesis has always been more about future expectations than firm, present-day financials. But that becomes harder to swallow as the stock's valuation rises. Today, Tesla is trading at over 100 times its estimated 2024 earnings. Analysts estimate Tesla's earnings will grow by an average of 22% annually for the next three to five years. That could easily change if Tesla reveals that Robotaxi or Optimus will be monetizable sooner rather than later. That said, investors are probably better off waiting for firm evidence than taking any announcements at face value. While 22% annualized-earnings growth is strong, it doesn't justify a price-to-earnings (P/E) ratio over 100. That's a price/earnings-to-growth (PEG) ratio over four, which implies that investors buying Tesla are paying through the nose for its anticipated growth. The market's sentiment could turn south if it becomes clear that Tesla's AI products are further down the road than hoped. Consider waiting for a better-buying opportunity or dollar-cost averaging to counter some of the volatility. The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now... and Tesla wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $780,654!* Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.