The stock market slipped into bear territory in 2022 as investors hit the panic button amid surging inflation, rising interest rates, and a chance that the U.S. could sink into a recession. But there are also chances that the new year could witness the arrival of a bull market thanks to cooling inflation, which could lead the Federal Reserve to pivot away from its hawkish stance.
As a result, it's possible that stocks could bottom out in the first half of 2023 and finish the year strongly. So savvy investors have an opportunity to accumulate some solid companies over the next few months that could fly higher.
Tesla (TSLA +0.91%) is one such company that could benefit in the event of a bull market. Its shares have lost 67% over the past year. But consensus estimates suggest that it could run up significantly in the next year. Let's see if Tesla could match Wall Street's expectations.
NASDAQ: TSLA
Key Data Points
Wall Street expects Tesla stock to jump sharply
Tesla stock is carrying a median price target of $250 based on a consensus of 36 analysts. That's 121% higher than the electric vehicle (EV) maker's current stock price. What's more, Tesla has a Street-high price target of $436, which would translate into a 286% upside from current levels.
It is worth noting that Tesla has been clocking terrific growth quarter after quarter thanks to the healthy demand for its cars. However, the broader stock market sell-off, CEO Elon Musk's acquisition of Twitter, and concerns that demand for Tesla's cars is weakening amid the macroeconomic slowdown have weighed heavily on the company's shares. The company's recent price cuts in China have further dented investor confidence.
Still, Tesla is expected to finish 2022 with a 53% jump in revenue to $82.5 billion and a massive 77% increase in earnings to $4.00 per share. The company is also expected to sustain its impressive levels of growth in 2023 and 2024.
TSLA Revenue Estimates for Current Fiscal Year data by YCharts
The five-year forecast also looks bright with Tesla expected to clock nearly 35% annual earnings growth for the next five years. There are a couple of reasons why the company could see such eye-popping growth.
First, Tesla is a key player in the major EV markets across the globe. The Tesla Model Y and the Model 3 are the top two best-selling EVs in Europe. In China, which is the world's largest EV market, accounting for two-thirds of global EV sales, Tesla has an 8% market share. In the U.S., Tesla controlled an estimated 65% of the EV market in the first nine months of 2022.
Of course, growing competition from both new and established players is likely to eat into Tesla's share in these markets in the future, but investors should note that the company is operating in a market that's built for secular long-term growth. From 2023 to 2028, EV sales are expected to clock a compound annual growth rate of 41%, hitting 148 million in annual shipments at the end of the forecast period. The advantage of being one of the early movers in this space should help the company sustain its momentum despite the growing competition.
The second reason why Tesla's outstanding growth is likely to continue is because of the company's expanding product portfolio and production capacity. It has been ramping up production aggressively, and it had an installed annual vehicle capacity of close to 2 million units at the end of the third quarter. The introduction of new products such as the Cybertruck and the Tesla Semi means that the company can enter more niches and strengthen its position in the EV market.
Attractive valuation -- and good time to buy
From a valuation perspective, Tesla stock also looks attractive today. The shares trade at 24 times forward earnings, compared to its five-year average of 124. At the same time, the price-to-sales ratio of 5.2 represents a nice discount to the five-year average of 10.7.
All in all, the combination of Tesla's solid growth, a potentially more upbeat stock market, and the shares' attractive valuation could help this beaten-down electric vehicle company soar big time in the new year and beyond.
