Exceptional S&P 500 Share Dropping by 58%: A Purchase Worth Holding Indefinitely
It appears that interest in Tesla (TSLA, down 3.46%) has waned, notably in the past few months. The company, known for its dominance in the electric vehicle market, has experienced a decrease in demand for electric vehicles. Additionally, some investors might be second-guessing the firm's business priorities, which may be affecting its stock price, currently offering a 58% discount compared to its 2021 peak.
Despite these challenges, lower stock prices often present buying opportunities. And given Tesla's ability to overcome obstacles, this situation likely holds such an opportunity.
Tesla's challenges might be short-lived
Certainly, the dip in electric vehicle sales has affected Tesla, and some investors have grown anxious about competition from Chinese EV producer BYD. Increased competition and price reductions have squeezed profits, causing some investors to lose faith in Tesla stock.
However, Tesla is not oblivious to these problems. To boost sales, Tesla offers 0.99% financing to buyers of the Tesla Model Y, a move expected to help sell more vehicles. Moreover, despite retreating from its goal of manufacturing 20 million cars annually by 2030, Tesla appears committed to ramping up production. The company aims to "replace fossil fuels by selling as many Tesla products as possible."
In support of this objective, Tesla reiterated in late April that it has not abandoned plans for an affordable electric vehicle. Although the company has yet to disclose details, such as whether it will be the Model 2 or a cost-effective version of an existing model, having a lower-cost option increases the likelihood that Tesla can sustain growth in sales, providing comfort to skeptical investors as the details become clearer.
The robotaxi's potential impact on Tesla
Yet, for all the attention on cars, the product that could become Tesla's next significant revenue source (a pun intended) is the robotaxi. While a fully autonomous platform is not yet a reality, Tesla's latest iteration of its full self-driving platform has shown significant improvements.
Furthermore, investors are eagerly awaiting Aug. 8, the date CEO Elon Musk has announced for the launch of the robotaxi.
This anticipation includes Cathie Wood and her team at Ark Invest, who have projected a $2,000 per share price target for the stock by 2027. Such an increase would equate to an 11-fold surge in the stock price over three years.
Investors have good reason to take this forecast seriously. In 2018, Wood proposed a split-adjusted $267 per share target when the stock traded for slightly more than a split-adjusted $20 per share. Tesla would eventually surpass the projected price during the 2021 bull market.
Moreover, to put the share price into perspective, Tesla's current market cap of around $555 billion would grow to approximately $6.4 trillion, roughly twice the size of market cap leader Microsoft.
Investing in Tesla
Despite Tesla's recent challenges and ambitious goals, history suggests that Musk and his team are likely to meet these goals, which could result in a stock recovery and push Tesla to new all-time highs.
Yes, Tesla has faced difficulties as it has evolved, but rising production and a robust robotaxi platform could significantly transform the company. If Tesla can achieve or even get close to these goals, it can not only get back to its all-time high but also surpass it.
Amidst Tesla's current challenges, some investors might be seeing this as an opportunity for financial gain through buying at a discount. Given Tesla's historical ability to overcome obstacles, this situation could potentially lead to significant returns if the company is successful in its future endeavors.
For instance, the upcoming launch of Tesla's robotaxi is generating a lot of buzz, with analysts like Cathie Wood of Ark Invest predicting a $2,000 per share price target by 2027. This projected increase, representing an 11-fold surge within three years, signifies a promising investment opportunity for those who believe in Tesla's autonomous vehicle potential.
