Tesla (NASDAQ:TSLA), with a revenue of $53.8 billion and a market capitalization of $900 billion, has often been seen as an overvalued stock by analysts. However, the sentiment seems to be changing as gas prices continue to rise. Naturally, Tesla sales have already started to soar, and I believe it is just the start.
With Russia, the country that produces the most crude oil (the primary ingredient for gasoline) at war, gas prices can be expected to stay elevated for a lot longer than what was previously forecasted. Moreover, it is almost certain that many countries will be reducing their energy dependence on Russia. If that happens, gas prices will naturally go up as other suppliers have to cope with a sudden rise in demand.
Of course, Tesla cars are costly. However, gas costs also add up over time. Gas prices can be even more of a headache for those living in the rural U.S., where cars are almost a necessity.
Without a decline in gas prices, consumers might find Tesla cars more economical in the long term.
TSLA Stock Is Still a Buy in the Long Term
TSLA is still overvalued, at least from a conventional viewpoint. However, there is more to a stock than just its earnings and market cap. TSLA has been fundamentally overvalued for almost a decade, but it has still gone up.
For example, someone following this 2013 article would’ve missed out on the 2,100%-plus worth of gains TSLA has since had.
In a nutshell, traditional metrics don’t seem to work for TSLA. Furthermore, Tesla has continued to have exceptional revenue growth, and it is slowly bridging the gap between its market cap and revenue.
It is still worthwhile to remember that the market is very unpredictable. If the current world situation leads to a recession, there’s no doubt that TSLA would nosedive along with the rest of the market. A recession can also drag down gasoline prices, like it did in 2008 and 2020.
However, I still believe that even in the case of a recession, TSLA can recover in the long term. Tesla has been rapidly expanding, and in a world where countries are shifting more towards renewable energy, it would not be far-fetched to see TSLA valued more.
Can TSLA Compete in the Long Term?
Tesla took electric vehicles seriously early on, which gave it an edge over its competitors. Even now, Tesla still does not face any significant competition from its main competitors, and the company has essentially dominated the EV industry. Moreover, Tesla has the most advanced self-driving features of any car and one of the lowest maintenance costs. They’re essentially doing to EVs what Apple (NASDAQ:AAPL) did with phones, offering user-friendliness at a premium.
Tesla’s competitors will undoubtedly catch up in the long run. However, Tesla will still command a significant portion of EV sales due to its popularity alone.
TSLA’s growth prospects also seem to be very promising. In 2021, Tesla produced over 930,000 cars. Moreover, it aims to reach 20 million EV sales per year by 2030 , and at Tesla’s current growth rate, it is definitely possible.
One should also note that Tesla is not just an EV company. It produces many energy products that add to its revenue, such as solar roofs and storage or charging solutions. They will also undoubtedly profit from the world’s transition to renewable energy. In short, I believe that TSLA is here to stay for the long term.
TSLA stock is still a risky buy in the short term due to the market’s uncertainty. However, I still believe that in the case of a market crash, Tesla will still inevitably recover. If a recession does not occur in the near future, the stock will likely reverse trends due to rising gas prices and soaring sales.
I do believe that in the long term, it can return a lot of profit. For the short term, making big moves in the current uncertain market is still very risky and should be avoided. Thus, I believe that anyone that seeks into invest in TSLA stock should not invest large amounts of capital. At least until the market shows more stability.