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Should you buy Tesla shares before July 23?

The time has come! The release of the second quarter earnings reports is just around the corner and, as always, all eyes are on the big technology companies.

The underperformers among mega-cap technology stocks so far this year have included Tesla (NASDAQ:TSLA)The main concerns of Tesla skeptics were demand trends for electric vehicles (EVs) and a murky – if not puzzling – macroeconomic picture.

However, the electric car maker’s shares have experienced something of a renaissance in the last month. The stock has risen 47% since mid-June and is expected to be up 5% in 2024.

Let’s examine what could be fueling Tesla’s current momentum and assess whether now is a good time to buy some shares before the company reports its earnings on July 23.

Fully autonomous driving is the focus

Cars are ultimately mass-produced products. Companies are forced to compete on price, making it difficult to identify the pros and cons of different vehicles.

Tesla faces major challenges, particularly in electric vehicles. Competition is intense both domestically and internationally. In addition, many consumers view electric vehicles as more of a luxury purchase, making the value proposition and sales cycle difficult.

Tesla’s biggest differentiator from the competition is perhaps its autonomous driving technology. Tesla wants to implement this software, called “Full Self-Driving” (FSD), across its entire electric vehicle fleet to attract more buyers.

From a technological perspective, this would be a huge improvement over the current state of Tesla cars. In addition, the economic impact of FSD should not be underestimated. Since fully autonomous driving is a software product, it represents a recurring revenue stream with high margins that would significantly increase the carmaker’s cash flow generation.

A fleet of self-driving cars on a highwayA fleet of self-driving cars on a highway

Image source: Getty Images.

And what about August 8th?

While the prospect of fully autonomous driving is intriguing, I think there may be another, subtle reason why Tesla stock seems to have attracted so much attention lately.

During the first-quarter earnings call, CEO Elon Musk alluded to an event in August that will focus on Tesla’s robotaxi, which represents FSD’s real opportunity.

Essentially, Musk’s vision is to build a large fleet of self-driving vehicles. Consumers can then request and use these robotaxis on demand for rides.

The advantages of such a service are obvious. Delivery services such as DoorDash or Instacart could be major beneficiaries of this technology, while ride-sharing apps like Above And Lyft Ultimately, consumers could also benefit from becoming customers of Tesla’s robot taxis.

Is Tesla stock a good buy right now?

This isn’t the first time stocks have exhibited meme stock behavior, and given how much the stock has risen in a short period of time, I think it’s pretty safe to say there are some momentum traders jumping in right now.

Following this dynamic can be dangerous: a stock can fall just as quickly as it rose.

I suspect that some investors are buying up Tesla stock for two main reasons. First, some may believe that some major update will be announced during the July 23 earnings call—for example, a licensing deal for FSD with another automaker.

Secondly, I believe that many investors are eagerly awaiting the robotaxi event on August 8th and are buying the stock in advance.

Unfortunately, while I am personally intrigued by both the earnings call and the robotaxi event, I do not think it is wise to buy such a volatile stock in the hope that something magical will emerge.

When it comes to investing in Tesla, I think it’s now clear that you have to share Musk’s vision. In particular, investors need to view Tesla as an artificial intelligence (AI) company, not just a car company.

Whether second-quarter results are better than expected or less inspiring, long-term investors will end up with plenty of opportunity to buy Tesla stock. The same dynamic can be applied regardless of how the robotaxi event goes in early August.

I think the best option for investors right now is to evaluate the results when they are released later this month and listen carefully to see if more information is released on the Robotaxi event. If not, I would wait and see how the event goes in August.

After these two dates, I think investors will have a much clearer picture of whether or not it makes sense to buy Tesla stock now. But right now, there is a bit too much optimism driving momentum that doesn’t seem to be detached from anything tangible.

Should you invest $1,000 in Tesla now?

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Adam Spatacco holds positions in Tesla. The Motley Fool holds positions in and recommends DoorDash, Tesla, and Uber Technologies. The Motley Fool recommends Instacart. The Motley Fool has a disclosure policy.

Should You Buy Tesla Stock Before July 23? was originally published by The Motley Fool

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