You’re here (NASDAQ:TSLA) just had one of its most disappointing quarters ever. This isn’t surprising, given the slowing growth in electric vehicle (EV) sales, but it’s disappointing nonetheless.
The stock market is forward-looking, and Tesla shares have already taken a beating due to a decline in vehicle production and deliveries compared to the year-ago period. The stock is down nearly 40% so far in 2024, even after shares rebounded when the first quarter results were announced.
The Tesla of tomorrow
This rebound in the stock was due to investors looking to the future. Tesla will offer a more affordable electric vehicle offering.
Previous reports had speculated that such a plan had been canceled. And on the conference call with investorsCEO Elon Musk has clearly stated that he believes the company will sell even more vehicles this year than in 2023. Continued growth is something investors are eager to see.
But a slight annual increase in vehicle sales isn’t what could make Tesla the best EV stock for retail investors buy now. The Tesla of tomorrow relies more on automation, artificial intelligence (AI)-based computing power and the strong growth of Tesla’s energy businesses.
Regarding that last point, consider what Chief Financial Officer (CFO) Vaibhav Taneja told investors on the conference call:
Our energy business continues to grow significantly with margins reaching a record 24.6%. We expect energy storage deployments for 2024 to increase by at least 75% compared to 2023.
Tesla’s energy segment includes power generation, as well as storage for consumer and commercial uses. The segment has already seen steady growth over the past two years.
Investors who see utilities and other companies moving toward large-scale energy storage to protect a power grid under increasing pressure should consider owning Tesla shares.
Transition to automation
For now, investors are focusing on the electric vehicle sector. And Tesla now appears to be pivoting in response to slowing demand for electric vehicles.
Elon Musk has long said he expects Tesla to produce a less expensive model that could appeal to a mass market. He touted a future change in the manufacturing process to increase efficiency, allowing this product to be profitable.
Today, however, the company has changed its thinking. Musk said the company is extending the timeline for this product, but will produce it on current manufacturing lines. This allows the company to utilize existing capacity and minimize capital expenditure for the new product.
Whether this product will be popular remains to be seen, as it could be seen as simply a stripped down version of the existing Model 3. But in the short term, the plan will save cash. Investors should like this, with sales growth currently at an all-time low.
Tesla still left the first quarter with approximately $27 billion in cash and equivalents. Musk’s vision is to use this money to finance the expansion of computing power and…
