Tesla (TSLA) has been one of the strongest movers on the NASDAQ this year. Many investors struggle with the idea that Tesla is priced so high, yet has relied on future performance till now to remain afloat. However, Tesla in recent months has shifted to an under promise and overperform outlook which has instilled a stronger sense of security for investors to hold onto. This strategy is used by arguably Australia’s best performing stock Macquarie group. Recently Macquarie have understated their earnings for Q1 as global tensions rise, however are still very unlikely to post a bad number. This gives investors confidence that the company will justify their results in crystal clear clarity.
Cost reduction/production outlook
In recent months, Tesla have been providing investors with results that were well overdue. Interestingly, the average price of Tesla sale per unit has fallen from $70,000 to $56,000 indicating that Tesla has finally found efficiency in their manufacturing and are slowly reducing costs. The China news was a massive confidence booster for investors, as the factory aims to produce 150,000 units annually. Not only providing an increase in supply, but concurrently reducing the cost. It is estimated that Tesla’s output is around 450,00 units which is estimated to grow to 1.2 million by 2023 according to Dan Galves on a recent podcast for Tesla Daily. A 1.2 million output for 2023 would land Tesla on par (output in units) with most German car manufacturers.
Potential for growth
Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.
The one thing I believe Tesla pessimists miss is the power of competition. So far, investors have only seen Tesla perform in a non-saturated market with no healthy competition. The biggest opportunity cost when choosing to not invest in Tesla, is when competitors start to push Tesla to become more price competitive and efficient. In theory, this shifts the industry into more of a perfect market.This push will be what Tesla needs to propel themselves and their stock price.
With Tesla, the best is yet to come. Many people have mixed opinions on Tesla including the Godfather himself Warren Buffet. Only time will tell whether Tesla will be able to handle a large quantity of output and remain above water as new companies enter the EV market.
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The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Written by Tyger Fitzpatrick, Founder of YIG.