Tesla (NASDAQ: TSLA) used to be an automobile company. Today it is a clean energy corporation that develops and produces electric vehicles, battery energy storage systems for homes and grids, solar panels, and solar roof tiles, as well as related goods and services for clients all over the world. It is one of the most important EV (Electric Vehicle) players in the world. With fingers in so many pies, Tesla has to work twice as hard while convincing markets, that it’s a good stock.
The supply chain challenges, Russia-Ukraine conflict, chip shortages, and other issues have all had a significant negative impact on the EV market this year. As a result, Tesla's stock has also been experiencing difficulties and is down over 32% year to date. Tesla shares are, however, once again witnessing a type of rally in recent days, following its most recent financial reports.
Why Tesla stock is a buy
Tesla has been one of the first movers in the competitive EV space, and its CEO Elon Musk ensures that the company is always in the limelight. Musk’s hype, as well as the company’s spectacular growth, has allowed Tesla to hit extraordinary valuations in recent years.
Tesla continues to expand its portfolio of products and services. It has also benefited greatly from its investment in Powerwall, a stationary rechargeable lithium-ion battery product that stores solar energy for backup protection. Another game changer in the solar sector could be the launch of its solar roof, which is intended to create clean energy for a home for decades.
After Tesla's second-quarter report came out better than expected, its shares began to skyrocket. The company’s revenue surged 43% year over year to $16.9 billion even in the face of unfavorable market conditions caused by significant supply chain bottlenecks and COVID-related factory shutdowns in China. In addition, the company's adjusted earnings, which were $2.27 per share, increased by 57% over the same period last year.
Despite the headwinds wiping out around 25% of the car's deliveries for the quarter, Tesla nevertheless managed to create over 258,000 vehicles in the second quarter, which is 25% higher compared to the year-ago period. Additionally, at just over 254,000 units, the company's overall deliveries grew by a whopping 27% year over year.
Tesla is now heading towards recording an annual delivery run rate of more than one million vehicles, increasing its delivery targets by an average of 50% over a multi-year period. Further, the company can now produce two million EVs globally each year, up from just one million around the same time last year.
Tesla has a massive reach
Despite the short-term obstacles, there are still many opportunities in the electric vehicle sector, and the long-term prospects still appear to be very bright. According to Allied Market Research, the market for electric vehicles could reach $823.75 billion worldwide by 2030, rising at a CAGR of 18.2% between 2022 and 2030.
Though the chip shortage issue may not be going away any time soon, EV manufacturers like Tesla will be able to operate at full capacity and considerably increase their income and profits when the chip shortage issue is finally resolved.
Investing in Tesla is a lot safer than investing in small cap EV stocks. The company has got immense room for growth even now and is in a perfect position to reap the benefits in this growing sector.
Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.
