Tesla (TSLA), the world’s most valuable automobile company, has a polarizing effect on the investing community. Led by its charismatic CEO, Elon Musk, Tesla has become a leader in electric vehicles (EVs) and has garnered a cult-like following. This is due in part to Musk’s leadership and in part to the company’s disruptive developments in fields such as full self-driving (FSD), artificial intelligence (AI), and robotics.
However, there are many skeptics who question Tesla’s ability to achieve its ambitious goals, as well as Musk’s volatile management style, and the stock’s premium valuation. In the current political climate, Musk’s alignment with Republican presidential candidate and former POTUS, Donald Trump, has further intensified the debate surrounding Tesla and its CEO.
Elon Musk, founder, CEO, and chief engineer of SpaceX, is also the CEO of Tesla. His influence on the company and its stock is significant, and his decisions have a direct impact on investor sentiment. The recent decision to align with Donald Trump has added another layer to the ongoing discussions about Tesla’s future and its stock performance.
Insiders are currently unloading a significant amount of Tesla shares, with approximately 1.13 million shares being sold under newly adopted insider selling plans. Notably, Elon Musk’s brother, Kimbal Musk, and Tesla’s Chair, Robyn Denholm, are among those adopting Rule 10b5-1 selling plans, which could amount to nearly $300 million if executed in full.
This news might raise concerns among some investors, but is it a reason to panic? To answer this, let’s delve into Tesla’s long-term prospects.
Tesla, established in 2003, is known for designing, manufacturing, and selling electric vehicles, energy storage solutions, and solar products. The company has also expanded into robotics and artificial intelligence over the years.
Tesla’s stock has shown impressive long-term growth. Since listing in 2010, it has been a multi-bagger, rocketing 20,175%. Shares are up more than 1,000% in the past five years. The company has a massive market cap of $833 billion. Planned insider sales totaling $300 million on a regular schedule are unlikely to significantly impact the stock’s momentum. However, Tesla shares have disappointed in 2024, rising just 5.3% year-to-date amid broader industry woes, including steady pressure on margins due to price cuts to boost sales. Tesla spikes on impressive Q3 earnings. After four consecutive quarters of missing bottom-line estimates, Tesla’s earnings exceeded Wall Street’s expectations in the third quarter. In fact, the shares had their best day in over a decade following the results.
Tesla’s Q3 financial performance was impressive, with revenues reaching $25.2 billion, marking an 8% yearly growth. The company’s key segments—Automotive, Energy Generation, and Services—saw significant revenue increases: Automotive grew by 2% YoY to $20 billion, Energy Generation surged by 52% YoY to $2.4 billion, and Services jumped by 29% YoY to $2.8 billion.
Earnings per share (EPS) also showed a strong performance, increasing by 9% to $0.72, which exceeded the consensus estimate of $0.59. This, along with the revenue growth, contributed to the 21% spike in Tesla’s stock price following the Q3 results.
Tesla’s cash flow metrics were equally impressive. Net cash from operating activities nearly doubled from the previous year, reaching $6.26 billion, up from $3.31 billion. Free cash flow saw an even more remarkable increase, growing by 223% to reach $2.7 billion. The company finished the quarter with a robust cash balance of $33.6 billion, significantly higher than its short-term debt of $2.3 billion.
The operational numbers were a key driver behind the stock’s surge, with insiders also noted to be selling their shares. This raises the question: should you consider selling Tesla stock as well?
Tesla’s total production for Q3 was 469,796 vehicles, up 9% from the previous year after two consecutive quarters of production declines. Total deliveries increased by 6% YoY to 462,890 vehicles. At the end of the quarter, Supercharger stations stood at 6,706 compared to 5,595 in the previous year. Operating margin jumped to 10.8% of sales in Q3, showing healthy growth YoY.
Tesla continues to dominate the EV market, holding around 51% of the U.S. market share by the end of 2023. With ambitious targets to sell 20 million EVs by 2030, the company plans to achieve 20-30% vehicle growth next year and aims to deliver around 2.1 million vehicles if 2024 production reaches approximately 1.75 million units. The company has expanded beyond car manufacturing, with its high-margin Services and Energy segments contributing significantly to profits.Tesla’s energy operations, including solar products and Megapacks, are being scaled globally. New facilities in Shanghai and Texas support this. The Texas facility will soon complete a 50,000-GPU cluster. This is designed to cut compute costs by reducing reliance on third-party GPU providers. Tesla will use this internal cluster to advance its FSD technology, develop its humanoid robot Optimus, and integrate the entire hardware-software ecosystem. The company recently unveiled the Cybercab, a pedal- and wheel-free robotaxi. It is designed to support Tesla’s entry into autonomous ride-hailing. Targeting production by 2026, Tesla aims for an annual output of 2 million Cybercabs. However, production challenges could pose setbacks, as seen with previous product delays. Tesla’s advantage in autonomous driving comes from its extensive real-world data collection, driven by its global EV fleet.
Insiders are currently selling Tesla stock, raising the question of whether you should follow suit.
Each Tesla vehicle equipped with Full Self-Driving (FSD) hardware serves as a data-gathering node, continuously providing high-quality driving data. This real-world data, accumulated from billions of miles driven, enables Tesla to develop and refine its models more effectively than simulation data alone. This approach leads to ongoing improvements in FSD capabilities. Tesla’s humanoid robot, Optimus, is also making rapid progress. It is already being used in some of Tesla’s factories, and Version 1 of Optimus is being refined through data-driven learning. This mirrors Tesla’s approach with FSD and positions the company as a leader in real-world applications of autonomous robotics. This development could potentially extend the reach of AI and robotics beyond the automotive industry. Analysts’ Stance on TSLA Stock Overall, analysts have a consensus “Hold” rating for TSLA stock. However, there has been a shift in sentiment, with 31% of shares now receiving “Buy” or better recommendations, up from 25% a few months ago.Analysts’ opinions on Tesla stock are varied. Out of 37 analysts covering the stock, 10 have assigned a ‘Strong Buy’ rating, while 2 have given a ‘Moderate Buy’ rating. Additionally, 17 analysts have a ‘Hold’ rating, and 8 have a ‘Strong Sell’ rating.
Despite these mixed reviews, Tesla’s shares have already surpassed their average price target of $215.22. The Street-high target for the stock is $315, suggesting an upside potential of approximately 20.2% from current levels.
