You can’t blame investors in Tesla (NASDAQ:TSLA) for feeling a little nervous these days. That especially applies to those who have bought shares over the past two years. Between November 2019 and November 2021, TSLA stock delivered a whopping 1,700% gain.
For years, Tesla had been an upstart electric vehicle marker that had struggled in every way. But by 2020, the company and its shareholders were laughing at the doubters. EV sales were ramping up, the days of fossil fuels seemed numbered and a new President was vowing to push America into the EV era sooner rather than later. Other auto makers were ramping up their own EV efforts by this time, but Tesla had a huge head start.
However, larger forces have de-railed TSLA stock since its November 2019 peak. A witches brew of economic and geopolitical concerns has resulted in mass market selloffs and Tesla has not been immune. TSLA stock is dropping once again to start this week. If you’re a short-term investor, this is probably not a great time to buy Tesla stock. If you’re in it for the long term? This is an opportunity to buy shares discounted by a third from the start of the year.
Market Volatility Is Not Going to Go Away Tomorrow
Let’s deal with the current market volatility first. There are so many issues at play right now (many of them inter-related) that there is no way to predict what any stock is going to do in the short term. Even Tesla.
There are the ongoing concerns about rising interest rates combined with inflation levels not seen in decades. The war in Ukraine has resulted in shortages ranging from sunflower oil to the nickel used in EV batteries. Embargoes against Russia have triggered a European energy crisis. Gas prices in the U.S. have hit all-time highs. Employers are dealing with demand for hybrid work schedules amid the “Great Resignation.” An ongoing shortage of semiconductors continues to cripple the auto industry. The Covid-19 pandemic is far from over, with swaths of China in lockdown, further impacting global supply chains.
All of these combine for what The Economist describes as a “toxic mix of recession risks” hanging over the world economy.
The result of all these factors has been a difficult year for the stock market, with growth stocks (like TSLA stock) feeling the impact especially harshly. This situation won’t last forever, but it’s clearly here for a while.
Tesla Is Well-Positioned to Continue Dominating
The short-term picture for TLSA stock — and the market in general — is volatile. In contrast, Tesla is one of those companies whose long-term prospects are golden.
In 2015, the global plug-in EV market amounted to almost 540,000 vehicles. Tesla was a big part of that, even though the affordable Model 3 had just been announced and wouldn’t go into production for another two years. In 2021, with multiple gigafactories online and churning out EVs, Tesla alone delivered over 936,000 vehicles. Close to double the global EV production from just seven years earlier. The company remains the global leader in EV production, with nearly 14% of the market.
With mandates coming into place worldwide (including in the U.S.) to slash carbon emissions, EVs are rapidly growing in popularity. Sky-high gas prices aren’t hurting, with consumers increasingly looking for ways to cut their driving costs. A March 2022 report pegs the value of the global EV market to hit $354.8 billion by 2028 (from $105 billion in 2021). That’s a CAGR of 19%. Telsa is expected to leverage its early leadership in the EV market to continue to hold a dominant position.
In other words, the long-term growth prospects for Tesla as a company are excellent. The long-term growth prospects for TSLA stock are solid.
Is Now the Time to Buy TSLA Stock?
If you are looking for short-term gains, TSLA stock could be risky at the moment. It has had some rallies, but being down 33% so far in 2022 isn’t a great sign. The factors that are hammering the stock market in general this year aren’t going to disappear overnight.
Those looking to benefit from long-term growth have a much more compelling argument for buying TSLA stock. Especially at the current, discounted price. TSLA stock rates an “A” in Portfolio Grader and the only real knock against it is the risk of volatility, which is much less of a factor if you’re looking at it as a long-term investment.
— Louis Navellier and the InvestorPlace Research Staff
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Source: Investor Place