Viewing Tesla (NASDAQ:TSLA) solely as an automaker is unjust; software, especially the Full Self-Driving Suite, plays a substantial role in its evolving business model. Analyst Mark Delaney from Goldman anticipates potential annual revenue in the tens of billions from the software offered by TSLA stock offerings by 2030, offering a recurring income stream.
Despite this outlook, the stock appears overextended, facing a slowdown in revenue growth and recent quarters with negative year-over-year net income growth.
Tesla is Slowing Down
Despite Tesla’s historical success, it’s advised to avoid its stock in 2024. While the company certainly remains a profitable player in the EV market, challenges and diminishing first-mover advantages raise concerns about its future performance. These concerns have been showcased in Tesla’s most recent quarterly results.
Tesla’s operating margin plummeted to 7.6%, revealing challenges. In 2023, frequent price cuts indicated weakening demand for its EVs. Rising inventory levels hint at potential future price reductions to manage production expansion.
Additionally, the TSLA stock faces income sustainability concerns, relying heavily on free renewable energy credits and interest income from its cash pile. Elon Musk’s tendency to overpromise and underdeliver contributes to unfulfilled expectations, while Tesla’s attempts to diversify beyond cars have struggled, reflected in a high valuation.
TSLA is Highly Volatile
Despite an optimistic end to 2023 driven by market performance, caution is advised for TSLA stock in 2024 due to potential share volatility. Uncertainty about the speculated “Fed pivot” may contribute to a turbulent market and short-term TSLA fluctuations.
Apart from market-driven fluctuations, Tesla’s shares might face a significant decline due to internal concerns. Negative news, especially regarding the Cybertruck, and potential disappointing elements in the upcoming earnings report may contribute to a challenging start for TSLA’s price performance in 2024.
In the optimistic scenario, TSLA shares have substantial growth potential. Consider holding existing positions and thinking about adding to your portfolio, but be patient and wait for potential dips before making any moves.
Elon Musk’s Public Perception May Be Changing
Elon Musk’s tardy and incoherent appearance at a SpaceX meeting raised concerns among executives about potential drug use, a recent Wall Street Journal article suggested. Musk’s rambling discussion on the Big Falcon Rocket prototype prompted SpaceX president Gwynne Shotwell to intervene and lead the meeting.
Musk’s alleged drug use, including LSD, cocaine, ecstasy, and ketamine, is at the heart of a report detailing executive struggles with his behavior across multiple companies. SpaceX, facing potential risks to substantial contracts and assets, could be affected by the reported drug use, putting at stake nearly $1 trillion in assets, 13,000 jobs, and the future of the US space program.
Musk’s representatives did not immediately respond to Business Insider, and Musk’s attorney dismissed The Journal’s account of the meeting as “false.” However, most investors believe that Musk could be among the least stable of his CEO peer group, something that generally doesn’t bode well for valuation considerations over the long term.
I Wouldn’t Bet the Farm on TSLA Stock Right Now
Tesla, with fewer vehicle sales but higher margins, faced pressure as it reduced model prices. Although subscriptions could enhance profits, challenges, including the loss of EV tax credits, may require further price cuts. Slowing growth suggests a potentially challenging year for the stock, particularly with other higher-growth options available to investors in this sector right now.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.