5 Reasons to Own Tesla into Year-End

Andrew Rocco
·2-min read

 

Why has Tesla Underperformed?

Elon Musk’s Tesla is the leading EV maker in the world and has rewarded shareholders with gains of more than 15,000% since going public in 2010. However, the road to profitability has been difficult for investors. Throughout the company’s history, Tesla (TSLA) has been plagued by fear, uncertainty, and doubt. Furthermore, the company has its fair share of detractors and is perennially among the most highly shorted stocks on Wall Street. The year 2024 is no different for the stock – shares are down more than 20% year-to-date as shrinking automotive margins and a cooling EV market have weighed shares down.

Is now the time to bet on a turnaround in the stock? Five bull catalysts hint at a turnaround and suggest the answer to that question is yes, including:

The EV maker’s revamped Model 3 and upcoming Model Y Refresh will support sales. Like fashion, the automotive industry is a game of “what have you done for me lately?” Tesla will revamp its two most popular models in 2024 and a refreshed vehicle line should help to support sales in the coming quarters.

Despite the recent pullback in the Nasdaq, Tesla is up more than 5% for the week – a sign of relative price strength. Few better signals exist than a stock that bucks the market trend. If TSLA can rise in a falling market, it will likely soar in a bullish market.

Tesla’s Robotaxi event is set for August 8th and should be a bullish catalyst for the stock. Elon Musk is betting the company on its Robotaxi plans. If history acts as a precedent, Musk’s bet will pay off. Elon Musk has a long history of making bold bets that pay off in the long term.  

Meanwhile, Tesla’s price-to-sales ratio has plunged from over 30 to ~7, making shares cheap from a valuation perspective. If the company’s earnings rebounds as I expect, Tesla will morph into a classic growth at a reasonable price (GARP) play.

Tesla deliveries have shown signs of a turnaround, and the July 2nd delivery announcement should be a tailwind for the stock.

 

Bottom Line

If Elon Musk and Tesla can execute on their new plan, investors should expect shares to rise much higher in 6-12 months.

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