Contemplating Purchasing Tesla Shares Prior to July 23?
It's that time again! Second-quarter earnings reports are on the horizon, with tech giants under the microscope. One tech stock that's had a turbulent year so far is Tesla (TSLA 4.21%). The electric vehicle (EV) sector, as well as economic uncertainties, have seemingly weighed on the company.
However, Tesla shareholders have experienced a heartening resurgence in recent weeks. Since mid-June, the stock has skyrocketed 47%, and it's currently up 5% in the 2024 financial year.
With Tesla's earnings report set for July 23, let's delve into the potential catalysts behind the EV producer's rally and examine whether this could be the ideal moment to add some shares to your portfolio.
Self-driving technology as Tesla's secret weapon
In the cutthroat world of automotive manufacturing, cars are mostly considered a commoditized product. Rival companies compete fiercely on price, making it challenging to decipher the merits and demerits of diverse vehicle offerings.
In the sphere of EVs, Tesla has its fair share of trials and tribulations. The competition is fierce both domestically and internationally. Moreover, consumers often view EVs as luxury purchases, complicating the value proposition and sales cycle.
Tesla has a major edge over its competitors – its cutting-edge self-driving technology. Dubbed full self-driving (FSD), Tesla aims to integrate this technological breakthrough into its fleet of EVs to entice more buyers.
From an technological standpoint, this advancement would be a significant leap from Tesla's current autonomous capabilities. Moreover, the economic impact of FSD should not be overlooked. As a software product, full self-driving represents a high-margin recurring source of revenue, which would significantly bolster the automaker's cash flow.
A surprise in August?
While the enticing appeal of FSD warrants consideration, there could be another underlying factor driving recent renewed interest in Tesla stock.
During the first-quarter earnings call, CEO Elon Musk hinted at an event in August focused on the company's robotaxi, the true potential of full self-driving.
Essentially, Musk envisions building a large fleet of autonomous vehicles, allowing consumers to call them on demand for transportation. The myriad of uses for this service are evident. Delivery services, such as DoorDash or Instacart, could greatly benefit, while ride-hailing apps like Uber and Lyft could theoretically emerge as customers of Tesla's robotaxis.
Is Tesla stock a worthwhile investment right now?
The current euphoria surrounding Tesla shares may prompt comparisons to meme stock behavior. Given the swift increase in the stock price within a relatively short timeframe, it's evident that there are many momentum traders actively buying shares at present.
Engaging in momentum trading can bring risks. A share price could plummet as rapidly as it climbed, so entering markets with this mentality is dangerous.
Investors might be attracted to Tesla shares for one of two reasons. Some may be anticipating a significant revelation during the July 23 earnings call, such as a licensing deal for FSD with another auto manufacturer.
Secondly, enthusiasm for the August 8 robotaxi event is evident, with some investors purchasing shares in anticipation of groundbreaking developments.
Regarding the July 23 earnings release and the August 8 event, I must admit that I am intrigued. However, I don't believe it's prudent to take on the risks associated with a highly volatile stock in the hope that something spectacular will unfold.
Investing in Tesla: A long-term perspective
When it comes to investing in Tesla, it appears that aligning with Musk's long-term vision is essential. Specifically, investors should see Tesla as an artificial intelligence (AI) company and not a mere automobile producer.
Come July 23, assessing the earnings results, and paying close attention to any new information about the August 8 event will allow for a more informed decision regarding Tesla stock.
By August, the market will have gained valuable insights, and savvy investors will be in a better position to determine whether purchasing Tesla shares makes sense at the current price point or if the stock should be added to a watchlist for future opportunities.
Ultimately, there remains an air of optimism surrounding the market, which could be fueling the momentum. But with such volatile market conditions, it's important to tread cautiously with Tesla stock and be patient as the events unfold.
In the context of Tesla's financial position, investors might be considering whether to invest more money in the company. With the stock price showing a significant increase in recent weeks and up by 5% in the current financial year, some might see it as an opportune time to invest.
Given Tesla's focus on self-driving technology, which could potentially provide a high-margin recurring source of revenue as a software product, some investors might be drawn to the prospect of Tesla becoming a significant player in the AI industry, beyond just a car manufacturer.
