After being adjusted for its most recent 3-for-1 stock split, Tesla’s (TSLA) stock price hit an all-time peak of $414.50 less than a year ago. In contrast, it has dropped by more than half, reaching a new 52-week low of $198 last week due to a weakening economy and the biggest bear market in the tech industry ever since the 2008 Global Financial Crisis. But Tesla still has a lot of business potential, particularly in the long run. Here are several arguments in favor of investors taking advantage of the stock’s decline to buy.
Tesla has been on peoples’ watchlist for years, but very few have ever taken the plunge and purchased it. Is this the right time to look further into how to buy Tesla stock in India? Let us find out.
Three reasons to buy Tesla stock
The electric vehicle development story comes first. Tesla is a market leader but is still in its early stages. Tesla built 365,923 EVs and successfully delivered 343,830 in the most recent quarter. These numbers have increased from 238,000 and 240,000 one year ago. The second is its highly developed autonomous driving technology. The potential is huge if the business can perfect “Level 5” driving technology, which allows for complete automation even in urban settings.
Tesla is also advancing in the field of robots. At its AI day recently, it presented its robot, “Optimus.” This might serve as yet another catalyst for business expansion. Having said that, it looks like this technology is well behind Boston Dynamics’. Regarding the stock’s price, Wall Street anticipates Tesla to produce $5.85 in earnings per share in 2023. That translates to a predicted P/E ratio of roughly 43 at the present share price. So it seems like Tesla’s PE ratio is lower than it was historically.
Expanding Product Line-up
For Tesla, the second quarter proved difficult. Its two new facilities, which are currently scaling up in Germany and Texas, were notably impacted by global supply chain bottlenecks and increased raw material costs. Lockdowns as China proceeded to enforce its zero-COVID policy affected both production at Shanghai manufacturing and consumer demand.
Tesla’s sales increased by 42% year over year in the second quarter despite all of these challenges, and the company generated $621 million of free cash flow. That’s not terrible considering that it was a difficult quarter. Additionally, the business is expanding its product line with success. Elon Musk, the company’s CEO, stated that sales for the Tesla Semi truck might start as early as this year and that the introduction of the Cyber Truck pickup truck should go as planned. In addition, as expenses are cut, a more affordable EV is anticipated to be included in the company’s product lineup.
The energy division of Tesla is likewise increasing its output. The rise of Tesla’s auto manufacturing has been supported by its gigafactories in more ways than merely increasing battery production. The business has been developing solar and battery storage systems that it offers to consumers separately. The graph below shows the comparable increase in the year’s first half starting in 2019. The business stated in its second-quarter report that it was stepping up Megapack storage production since customer demand was still high and exceeding its production rate.
Tesla also has Giga Press in the making.
If you are looking into how to buy Tesla stock in India, the 3 efficiencies that Tesla is trying to achieve through the Giga Press could be interesting to note:
- To make cars 3x faster: Fast die-casting equipment is being introduced by Tesla to transform the auto industry.
- To make the car lighter: To connect the front and rear of the car’s bodywork, Tesla has created a new battery pack. It serves as a fundamental structural component of the car, making production and the car lighter, as opposed to a pack attached to the chassis with several metal pieces.
- To reduce the overall cost of the EV: These devices use molten aluminum to produce most of the chassis in a single piece, eliminating the need for 200 industrial robots and a 60-part assembly.
The production risk associated with experimenting with new procedures and the need for approval from the Local Authorities, however, are the barriers. German giant VW has also revealed the plans for a fresh EV manufacturing plant.
Things to watch out for before investing in Tesla
If you are looking into how to buy Tesla stock in India, there are certain things you need to watch out. Investors in Tesla are probably still recovering from their wounds after witnessing the stock of the world’s largest EV manufacturer decline to re-test its May lows. TSLA has severely underperformed the S&P, falling more than 25% as opposed to the 12.2% decline of the S&P 500 ETF.
As seen above, since it was low in March 2020, TSLA has maintained its Next Twelve Months Free Cash Flow trend. Even though FY22 is anticipated to see an FCF growth of over 90%, the trend has already begun to diverge. The dominant EV maker is not expected to continue its growth tempo in the market, which is looking far into the future. Therefore, Tesla bulls should anticipate significant value compression to increase the growth premium and bring it more in line with its car and industry peers.
Tesla’s story is yet another brilliant illustration of how, perhaps more than any other country in the world, the US seems to offer a more fruitful soil for disruptive innovations that upend entire industries. There is no doubt that the fact that the US has a sizable market and minimal legal restrictions that prevent newcomers from introducing their solutions, testing them, and improving them in practical settings helps a lot. This is true in the case of Tesla.
Most of Tesla’s revenue for 2021 came from the sale of cars, which totaled approximately USD 44.1 billion. Model 3 and Model Y products, which made up over 94% of Tesla’s automobile deliveries by the model in the second quarter of 2022, outperformed the Model 3 and Model X products, which initially were intended for customers in the high-end part of the market. Tesla is now going after broader client segments with the launch of the Model Y and Model 3. The eagerly awaited Cybertruck and the second-generation Roadster are anticipated enhancements to Tesla’s current product lineup. Although it has its sights on the Chinese and European markets, Tesla concentrates primarily on the American market.
How to buy Tesla Stock in India
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