Tesla (NASDAQ:TSLA) stock is up significantly. This is due to the fact that the electric vehicle (EV) company’s Q3 earnings were much better than expected. But, is Tesla stock worth buying right now? Let’s take a look at the investment case.
Is Tesla a good investment?
Tesla’s Q3 earnings were encouraging.
For the quarter, revenue came in at $25.2 billion, up around 8% from the figure in the same quarter last year.
Meanwhile, adjusted profit was 72 cents per share, up from 66 cents per share in Q3 2023 and significantly above the consensus forecast of 58 cents.
In terms of gross profit margin, it was 19.8%, which was well above the figure of 17.3% that analysts were expecting.
Looking ahead, CEO Elon Musk said that he expects vehicle sales to grow by 20% to 30% next year.
He also said that Tesla is on track to make a more affordable vehicle, starting in the first half of next year.
So, the outlook for the company in the short term looks pretty good.
A long-term growth story
It’s the long-term story that’s really exciting, however.
In the long run, Tesla plans to roll out its Full Self-Driving (FSD) technology and have robotaxis on the road. This could be a game-changer for the company.
It also plans to be very active in the robotics space with its ‘Optimus’ humanoid robots. Musk believes that these robots will be the “biggest product ever, of any kind.”
Overall, there’s a lot to be excited about here.
Is Tesla a buy today?
The thing is though, Tesla stock is very expensive right now.
Currently, the consensus earnings per share forecast for 2024 is $2.28. So, at today’s share price of $242, the forward-looking price-to-earnings (P/E) ratio is about 106.
That’s a high valuation and it doesn’t leave much for error. In other words, buying now could be risky as the stock could experience a significant pullback at some stage.
Tesla share price forecasts
Of course, the stock could keep rising from here.
Currently, many brokers have price targets that are above the current share price.
Canaccord Genuity, for example, has a target price of $278. It believes that Tesla is an accelerating revenue and earnings story.
Wedbush, meanwhile, has a target price of $300. It believes that the Q3 results were a huge step in the right direction for the Tesla story.
That said, some brokers have price targets that are significantly lower than today’s share price.
One example here is TD Cowen, which has a target of $180 and a ‘Hold’ rating on the stock. It notes that competition is rising in the EV space.
Another broker with a lower price target is Bernstein. It has a ‘Sell’ rating on Tesla and a price target of $120, so it clearly doesn’t think it’s smart to buy Tesla stock now.
Is Tesla stock a good buy?
In conclusion, if you’re asking yourself, ‘should I buy Tesla stock now?’, you should weigh the risks against the potential returns before making a decision.
If Tesla can continue to generate growth from electric vehicles, roll out a cheaper model, and perfect its FSD technology, the stock could deliver attractive returns in the years ahead.
However, if EV growth slows or the FSD technology experiences some setbacks, the stock could fall sharply due to its high valuation.
Based in London, Edward is a distinguished investment writer with an extensive client portfolio comprising a diverse array of prominent financial services firms across the globe. With over 15 years of hands-on experience in private wealth management and institutional asset management, both in the UK and Australia, he possesses a profound understanding of the finance industry.
Before establishing himself as a writer, Edward earned a Commerce degree from the prestigious University of Melbourne. Complementing his academic background, he holds the esteemed Investment Management Certificate (IMC) and is a proud holder of the Chartered Financial Analyst (CFA) qualification.
Widely recognized as a sought-after investment expert, Edward’s insightful perspectives and analyses have been featured on sites such as BlackRock, Credit Suisse, WisdomTree, Motley Fool, eToro, and CMC Markets, among others.
You can contact Ed at edward@goodmoneyguide.com
