Tesla (NASDAQ:TSLA) has been the underperformer among the Magnificent Seven stocks in 2024. The electric vehicle (EV) manufacturer is grappling with issues distinct from those of its competitor, Rivian (NASDAQ:RIVN), which recently reported disappointing earnings that sent its stock spiraling downwards. The overall slump in the EV market is exerting pressure on the entire industry, including Tesla.
However, Tesla has more going for it than most other automakers. While the immediate future may be turbulent for Tesla investors, a long-term analysis of TSLA stock paints a different picture. Let’s explore where an investment in Tesla might stand a decade from now.
High interest rates are making new car purchases unaffordable for many. Rivian manufactured over 17,500 vehicles in the last quarter, marking an 8% increase from the previous quarter. However, it delivered 10% fewer vehicles, or less than 14,000 cars, compared to the third quarter. The luxury EV maker anticipates its production to remain essentially flat at 57,000 vehicles in the coming year.
The situation is not much better at luxury EV peer Lucid Motors (NASDAQ:LCID), which expects to produce just 9,000 vehicles in 2024. This is a slight increase from last year but falls significantly short of the 22,600 EVs analysts had predicted.
The growth of EV sales in the industry is declining more rapidly than anticipated. Ford (NYSE:F) has cut its F-150 Lightning production by half, while GM is slowing down its EV production schedule.
Tesla has not provided specific production figures for the upcoming year, but it has stated, “vehicle volume growth rate may be notably lower than the growth rate achieved in 2023.”
The EV market, which is smaller than analysts predicted, is heading towards a shakeout. Early adopters have made their purchases, but the broader consumer base remains skeptical about the value of EVs. This hesitation is evident in the robust growth of Toyota’s (NYSE:TM) hybrid vehicle lineup, suggesting that buyers are not fully confident in battery EVs and prefer having a fossil fuel backup option.
Despite these challenges, Tesla is poised to remain a dominant player in the EV market. The company has been instrumental in revolutionizing and popularizing EVs, and today, it stands as the leading EV manufacturer and a growing automaker overall.
Tesla reported $82 billion in EV sales last year, a 15% increase from the previous year. It also earned $8.9 billion in operating profits, despite a 35% year-over-year drop. In 2023, nearly 1.85 million EVs were produced, and Tesla delivered 1.8 million of them.
Tesla not only commands a 55% share of the EV market amid increasing competition, but it also holds more than a 4% share of the entire automobile market. This share is larger than that of Mercedes-Benz (OTCMKTS:MBGAF), BMW (OTCMKTS:BMWYY), Subaru (OTCMKTS:FUJHY), and Volkswagen (OTCMKTS:VWAGY).
However, with a trading value of 45 times trailing earnings and 6 times sales, TSLA stock remains highly valued. The coming decade is likely to be more challenging than the past ten years. While Tesla is unlikely to fail like Rivian and Lucid, it may not outperform the market either. For TSLA stock to be a viable investment, its share price would need to drop significantly from current levels.
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