Tesla’s (NASDAQ:TSLA) share price is up over 100% in the past year. The company, founded in 2003, designs, develops, manufactures, sells, and leases all-electric vehicles and energy generation & storage systems. And it offers services related to the company’s sustainable energy products.
In its drive to become an automotive powerhouse, Tesla’s share price has had a meteoric rise within a short period. The stock is up over 2,000% in the past 5 years. And most of this growth was achieved since December 2019. Let’s take closer a look at the group’s financial performance, and see whether I should be considering this business for my portfolio.
Diving into the numbers
Looking back at the company’s financial statements since 2014, there has been a consistent rise in the company’s gross profit and revenue. And in 2020, the firm became profitable for the first time. This profitability has remained, with each quarterly report in 2021 delivering net income. In my opinion, Tesla as an investment has become far more attractive over the years.
In its most recent third-quarter earnings report, Tesla’s total revenue grew 57% year on year. This was driven by continued growth in vehicle deliveries as well as other parts of the business. More importantly, the firm is becoming even more profitable. Operating income for the period improved to $2bn compared to last year. This rise seems to stem from improved operating efficiencies and reduced manufacturing costs. Needless to say, this is positive news. So seeing the Tesla share price rise on this report is hardly surprising to me.
Where will the Tesla share price go in 2022?
Thanks to these latest earnings, the Tesla share price reached an all-time high of $1,045.02 on Monday. But can it continue to climb higher next year? Here’s what I think.
Despite the increased vehicle volumes, Tesla’s Factories have not been producing at full capacity. Meanwhile, the group is also constructing a new production facility in Austin, Texas, where it recently moved its headquarters to. Once this facility comes on-line, I wouldn’t be surprised to see car sales climb even higher. After all, even with rising competition, the supply of electric vehicles seems to be significantly lower than the demand.
In the company’s outlook, Tesla expects to achieve 50% average annual growth over a multi-year horizon. Furthermore, it has some new products in its pipeline, such as the Cybertruck. With that in mind, seeing some analysts predict the Tesla share price rising to as high as $1,590 next year isn’t unexpected.
It’s not all smooth sailing
Tesla may be the current leader in the US and Europe for electric vehicles, but it’s not the only automotive manufacturer entering this space. Traditional car manufacturers are investing heavily into their own electric vehicles to create viable alternatives at lower prices. Beyond the general risk of rising competition, these firms may start stealing market share from Tesla in the near future. Suppose the company cannot hold or expand its ground. In that case, the analyst forecasts for the Tesla share price could be far too optimistic.
Despite these risks, Tesla still remains on my buy list. Its first-mover advantage has proven to be pretty lucrative so far. And while the share price is undoubtedly expensive, the future growth potential for 2022 and beyond makes it a risk I’m willing to take for my portfolio.
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Prosper Ambaka does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned at the time of writing. Views expressed on the companies and assets mentioned in this article are those of the writer and, therefore, may differ from the opinions of analysts in The Money Cog Premium services.
