Tesla (NASDAQ: TSLA) stock could be worth watching today after yesterday’s after-hours update on trading. Do some really encouraging numbers, coupled with a substantial fall in its share price in 2022 to date, suggest the company is a bargain?
“Breakthrough year”
Having been accused of running on empty for so long, there can be no doubt that the US giant is now a consistently profitable company. Following a stonking 71% increase in sales to $53.8bn, Tesla brought in $5.5bn in earnings last year. The latter was up almost 59% on 2020 ($3.47bn).
All told, Tesla delivered 936,000 vehicles in 2021 — almost double what it achieved in the previous year. Sales in Q4 also rose to 306,800 vehicles, highlighting just how quickly demand for electric vehicles is growing. No wonder it labelled 2021 as a “breakthrough year” for the company.
Of course, one should only put so much weight on these figures. To make money on Tesla stock from here, I need to know what the outlook is like.
Perhaps the most striking announcement last night was the Texas-based company’s belief that it will grow sales “comfortably above 50%” this year. That’s despite Tesla, like all car manufacturers, being impacted by the ongoing shortage of semiconductors as a result of demand spiking over the pandemic.
Whether it can actually hit this target is open to debate. However, the prospect of its Austin factory coming on-line soon bodes well. Although still awaiting a permit to deliver vehicles in Europe, it’s only a matter of time before Tesla’s new factory in Berlin is also operational.
So, is Tesla stock now a buy?
Based on last night’s update, I think the 22% fall in 2022 so far looks overdone. The prospect of a more affordable model hitting the roads in 2023 should also attract those previously put off by the price tag of its vehicles. Tesla’s finances look strong too, with cash at $17.6bn at the end of the year and minimal debt.
On the flip side, those ongoing supply chain issues will take a while to correct. Quicker-than-expected interest rate rises could also push more investors to abandon growth stocks — regardless of quality — and focus instead on those that could stage a post-pandemic recovery. They may not be as sexy as Tesla but financials, energy and travel companies may be in greater demand as we move through 2022.
As impressive as his record of proving critics wrong is, CEO Elon Musk also strikes me as a Marmite CEO. You either love his maverick nature or you consider it a liability. Regardless, one does need to be comfortable knowing that a casual tweet from Tesla’s leader can be sufficient to move the needle in either direction.
An alternative solution
Global markets remain volatile. As such, I’m still content to get exposure via FTSE 100 member Scottish Mortgage Investment Trust for now. Based on its most recent factsheet, just over 5% of assets are tied up in the electric vehicle maker. Naturally, this means I won’t get the full benefit if Tesla stock jumps. However, nor will I suffer much if the price keeps falling.
Notwithstanding this, I do think Tesla’s share price movements over the next few weeks will serve as a useful way of gauging market sentiment. And while I still don’t consider it a bargain today, my hand may be forced if the sell-off continues.
Paul Summers owns shares in Scottish Mortgage Investment Trust. The Motley Fool UK has recommended Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
