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Is it too late to buy Tesla shares?

Since reaching a peak in 2021 Tesla (NASDAQ:TSLA) has struggled to gain much, if any, momentum. The stock once traded at over $400 per share, but has come under pressure over the past three years and currently trades at around $185.

While those who invested before 2021 are likely sitting on comfortable gains, those who invested more recently may not be so lucky. Perhaps Tesla’s best days are already over, which begs the question: is it too late to invest in Tesla?

Two Tesla vehicles drive along a snow-covered hill.Two Tesla vehicles drive along a snow-covered hill.

Image source: Getty Images.

Explanation for Tesla’s crash

Tesla’s share price decline is largely due to declining gross profit margins. At its peak, Tesla’s margins were over 30%, by far the best in the entire auto industry. Today, those margins have dropped to 17%, which, while still in the top range, is now facing a number of pressures.

The reasons for this decline are varied, but can be attributed to lower consumer demand for electric vehicles. Higher interest rates have deterred potential buyers due to the increased cost of financing a vehicle. To stimulate demand, Tesla decided to cut prices in 2023. This, combined with higher costs in supply chains and labor markets, led to declining margins.

TSLA Gross Profit Margin (Quarterly) ChartTSLA Gross Profit Margin (Quarterly) Chart

TSLA Gross Profit Margin (Quarterly) Chart

However, interest rates will eventually fall and demand for electric vehicles should recover, as these factors are typically cyclical. Current trends suggest that interest rates may finally start to fall by the end of the year. Of course, as loans become cheaper, consumer demand for electric vehicles should also pick up again.

In addition, Tesla is likely to benefit from the general trend towards the global adoption of electric vehicles. Governments are implementing stricter emissions regulations and offering incentives to encourage the purchase of electric vehicles, creating a supportive environment for Tesla’s long-term growth.

In addition, the company is expanding internationally: a factory is currently being built in Mexico and the company plans to gain a foothold in India and Thailand in the coming years.

A new Tesla is taking shape

Tesla wants to become more than just an electric car manufacturer. One of the company’s main goals right now is to build autonomous vehicles and start a robotaxi company. Tesla’s self-driving car technology has made great progress and the company is preparing for a global demonstration of its robotaxi on August 8th.

In addition to autonomous vehicles, Tesla is also preparing its humanoid robot Optimus for commercial launch, which is expected to take place in 2025. Although this effort is not yet ready for a broad commercial release, Tesla has made remarkable progress. Optimus is already being used in Tesla factories, showing its potential to increase efficiency and reduce labor costs in all sorts of industries.

Taking the optimistic path

Critics will point out that Tesla and deadlines don’t always mix well, but it’s hard to count on the company’s ability to ultimately meet its goals. If Tesla can achieve similar success with its robotaxis and Optimus as it has with its electric vehicles, it could change the company, and perhaps even society, for the better.

Although it is difficult to quantify the true financial impact of these two innovations because there is no market for these types of products, some estimates put the total revenue of Robotaxis at $700 billion per year and that of Optimus at around $1 trillion. So, combined, these two innovations would more than triple Tesla’s current revenue if they come to fruition.

While I may be overly optimistic now, I believe Tesla’s best days are still ahead of it and it’s not too late to invest in one of the most disruptive companies of the future. Tesla’s ability to innovate and push the boundaries of technology has been a key driver of its success so far. If it can continue to lead the electric vehicle market while successfully expanding into new areas like autonomous vehicles and robotics, the company could reach even greater heights.

Should you invest $1,000 in Tesla now?

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RJ Fulton holds a position in Tesla. The Motley Fool holds a position in Tesla and recommends it. The Motley Fool has a disclosure policy.

Is It Too Late to Buy Tesla Stock? was originally published by The Motley Fool

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