Tesla Stock: Is Now a Good Time to Buy?

Tesla stock hit a record earlier this month, but some experts believe there may be better entry points in the future. Gene Munster, managing partner at Deep Water Asset Management, believes that Tesla stock is currently undervalued over the long-term.

Demand and Profitability

On the demand side, Tesla recently cut the price of their Model 3 by 30%, which has reportedly stoked demand. According to Google Trends, search traffic for the Model 3 is up 50% and lead times have been extended by an additional month and a half over the past week. This suggests that retail investors are picking up on the increased demand for Tesla vehicles.

However, there is one piece of information that is not yet known: profitability. Munster expects Tesla to give guidance for 2023 profitability margins somewhere between 15 and 20%. This is a significant decrease from the 27% growth margins in the September quarter. This decrease in margins may cause a dip in shares on Wednesday.

Factoring in Price Cuts

One question that arises is why this decrease in margins may not be factored into the stock now, even with the recent run-up. Munster believes that there are a couple of reasons for this. Firstly, there is an emotional component to retail investors’ impact on Tesla stock. Some investors may be too optimistic in the near term, believing that the increase in volume will create economies of scale that will support margins. Additionally, the component supply and component cost environment has been starting to become more favorable towards Tesla, but it is not yet known to what extent this will affect profitability.

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Conclusion

In conclusion, while Tesla stock may be undervalued over the long-term, there may be better entry points in the future. Investors should pay attention to the company’s guidance on profitability margins for 2023, as it may cause a dip in shares. Additionally, it is important to consider both the emotional and mathematical factors that may be impacting the stock’s current performance.

Why does Gene Munster believe Tesla stock is currently undervalued over the long-term?

Gene Munster, managing partner at Deep Water Asset Management, believes that Tesla stock is currently undervalued over the long-term because of the company's expected growth in demand for their vehicles and the potential for increased profitability in the future.

How has the recent price cut for the Model 3 affected demand for Tesla vehicles?

The recent price cut for the Model 3 has reportedly increased demand for Tesla vehicles. According to Google Trends, search traffic for the Model 3 is up 50% and lead times have been extended by an additional month and a half over the past week.

What is Gene Munster's expectation for Tesla's profitability margins in 2023?

Gene Munster expects Tesla to give guidance for 2023 profitability margins somewhere between 15 and 20%, which is a significant decrease from the 27% growth margins in the September quarter.

Why might the decrease in profitability margins not be factored into the stock now?

There are a couple of reasons why the decrease in profitability margins may not be factored into the stock now. Firstly, there is an emotional component to retail investors' impact on Tesla stock. Some investors may be too optimistic in the near term, believing that the increase in volume will create economies of scale that will support margins. Additionally, the component supply and component cost environment has been starting to become more favorable towards Tesla, but it is not yet known to what extent this will affect profitability.

What should investors pay attention to regarding Tesla stock?

Investors should pay attention to the company's guidance on profitability margins for 2023, as it may cause a dip in shares. Additionally, it is important to consider both the emotional and mathematical factors that may be impacting the stock's current performance.

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