Although some analysts have long said that Tesla (NASDAQ:TSLA) is overpriced based on unrealistic future expectations, the company is experiencing a far more gentle landing.
Year to date, Tesla shares are down 7.5%, which is somewhat worse than the S&P 500’s decline. Because Wall Street was concerned that its first-quarter results would be weaker than projected, they dropped 5% on Wednesday.
That was not the case. First-quarter profits for Tesla were $3.3 billion, exceeding Wall Street’s expectations by a wide margin. In premarket trade on Thursday, the company’s shares are up 7%.
In recent months, Tesla’s stock has been under some pressure. As interest rates increase, investors are pulling back from riskier bets, and Tesla is not exempt from supply chain issues.
According to others, the broader stock market hasn’t performed as well as expected. Several factors contribute to this. In the first quarter of 2022, Tesla’s profits were impressive. Despite the difficulties, the company’s future is bright.
To beat 2021 by 60 percent, Tesla CEO Elon Musk stated that the company expects to create 1.5 million cars this year. “It’s coming back with a fury,” he said of the company’s Shanghai facility, which had been shut down due to coronavirus lockdowns.
In the second year in a row, the firm plans to split its stock, making it more accessible to the general public by lowering the price of each share. Tesla’s stock soared by 8% after the company revealed that it would vote shareholders to decide whether or not to separate the company.
Cost and supply chain snarls are common for many manufacturers, but Tesla is particularly vulnerable to these issues. Following Russia’s invasion of Ukraine, the price of metals used in batteries, such as nickel and lithium, increased. As a result, shipping, electricity, and labor costs have also increased. On the other hand, Tesla has been able to offset rising expenses by boosting the price of its cars.
The waitlist for Tesla automobiles is “very lengthy,” Musk noted, despite the company’s record quarterly profits.
As a result of decades of high inflation, he said, the corporation aims to make electric cars as “cheap as feasible.”
Tesla’s most inexpensive vehicle, the Model 3, might lose part of its market share due to rising pricing. However, according to JPMorgan analyst Ryan Brinkman, the company’s dedicated and ambitious customer base and often lengthier waitlists may put it in a stronger position than some of its rivals.
That doesn’t imply Tesla’s stock is safe from a sell-off: There are still risks. Investors should pay attention to what Bank of America analyst John Murphy had to say on Wednesday: “This product may already be overpriced for its quality (or at least priced for hyperbolic growth). ” This will make it more challenging to record new rallies and hold on to gains.
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