Tesla stock: should you trade it in 2024?
By Paul Reid
05 January 2024
Elon Musk is back in the global spotlight, and the consequences of his recent comment directed at advertisers retreating from his X social media platform, may soon manifest in mainstream media narratives. Are the financial media channels fair and objective when reporting on Tesla, or do they cherry-pick to create a negative story? Let’s explore Tesla and the possible media effects on Tesla stock — and see if it’s a buy or sell opportunity in 2024.
Tesla in the news
Several tier-1 financial news channels recently reported that Tesla’s car production fell short of Musk's aspirations, suggesting a bearish outlook for the electric vehicle giant. What they’ve failed to mention is that Tesla's delivery numbers hit a record in 2023 with around 1.82 million vehicles delivered, up 37% from 2022.
You may have heard that Tesla is dealing with increased regulatory scrutiny and challenges in scaling new models like the Cybertruck. But remember that of the six Tesla vehicles in production, the Cybertruck represents only around 3% of Tesla's expected sales volume in 2024.
Tesla's margins are said to be under pressure after its operating margin dropped to 7.6% in Q3 of 2023. Firstly, a 7.6% margin aligns with the industry average, and secondly, those tighter margins are primarily due to Tesla's extensive price-cutting strategy to challenge competition and improve EV affordability. A goal Musk is not shy about talking about.
Most recently, the media reported that the Chinese EV manufacturer BYD outsold Tesla in Q4 of 2023. This is true. However, Tesla did not see a decline in car sales in China in Q4 2023. In fact, Tesla's China vehicle deliveries increased in Q4 compared to Q3 2023. That is also true of Tesla’s global car sales, rising from 435,000 in Q3 to 484,000 in Q4.
Simply put, the Chinese company BYD had a fantastic Q4, in China.
When considering whether to buy or sell TSLA, keep in mind that while Tesla’s numbers and strategy seem solid for the coming year, one-sided media reports may sway sentiment to the negative.
Pros and cons of Tesla stock
On the upside, Tesla stands to benefit from cost savings due to its battery production capacity and potential rebates under the Inflation Reduction Act. However, these benefits could take years to significantly impact Tesla’s bottom line.
Pros that suggest buying:
Tesla's leadership in EV innovation and Musk's ambitious goals suggest future solid growth.
Expansion plans and new product launches indicate potential market dominance.
The growing global shift towards renewable energy could favor Tesla's market position.
Cons that suggest shorting:
Intense competition from established automotive companies like China’s BYD may continue to challenge Tesla's global market share.
Musk’s reputation for not playing nicely with highly influential institutions could put a target on Tesla’s back.
Dependence on technological advancements and regulatory changes could put Tesla in a tight spot without notice or solution.
Tesla's stock performance in 2023 was impressive, boasting a remarkable 100% return, albeit the growth came after a troublesome 2022, when the stock lost 65% — making much of that gain a recovery.
The company's future success will likely hinge on its ability to maintain delivery growth, manage production costs, and navigate regulatory environments. The stock's current valuation also reflects a premium based on future expectations, which includes high-margin software and after-sales services.
Given that several voices currently oppose Tesla and, consequently, TSLA, ‘trade and hold’ might not be the best approach. Contrasting opinions with broad exposure could significantly sway market sentiment, which means a day trader with no interest in overall trends might see more opportunities from coming volatility.
This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.
Paul Reid is a financial journalist dedicated to uncovering hidden fundamental connections that can give traders an advantage. Focusing primarily on the stock market, Paul's instincts for identifying major company shifts is well established from following the financial markets for over a decade.