Tesla (TSLA -1.80%) is the undisputed leader of the electric vehicle industry. It produces and sells the most cars, and it also maintains the highest profit margins. But competition is growing, and Tesla is facing threats not only from electric vehicle start-ups, but also established car manufacturers moving into the space.
That's why Wall Street watches the company's quarterly delivery numbers closely. They indicate whether Tesla is on track to meet its yearly sales targets and, therefore, just how impactful the competition has been.
It just released its production and delivery figures for the first quarter of this year, and both numbers marked an all-time high. But that's not the entire story, so should investors buy Tesla stock on those results?
Image source: Tesla.
Tesla's 2023 first-quarter deliveries hit a record high
Like most automakers, Tesla is grappling with a series of challenges at the moment stemming from a very difficult global economic environment. Red-hot inflation and rising interest rates are impacting consumers' spending power, so buying a new car has been put on the back burner for many people.
To soften the blow, Tesla has been slashing prices across its line of vehicles since late last year. The company believed the move would shore up demand, and it was right (to a degree).
In the first quarter of 2023 (ended March 31), Tesla produced 440,808 cars and delivered 422,875 to customers. It was a record-high on both counts, with deliveries in particular growing 4% sequentially and 36% year over year. However, analysts were expecting 432,000 deliveries so the figure fell short of expectations, which is why Tesla stock opened trading in the red today.
That potentially creates a larger problem. Tesla has forecasted 1.8 million deliveries for the whole of 2023, which means it will need to average 450,000 per quarter to get there. It clearly fell short of that target in Q1 despite price reductions, which raises questions about whether competitors might be taking market share.
Based on data from research firm Experian, we already know Tesla's share of electric vehicle sales in the U.S. declined to 65.4% at the end of 2022, from 79.4% just two years prior. This decline is inevitable, but as electric vehicle adoption continues to grow, the pie will become larger so Tesla doesn't necessarily have to maintain such a high share to be successful -- though if it misses its own delivery targets in 2023, investors will begin to worry.
But Tesla's long-term story features more than just electric vehicles
Should investors rush to buy Tesla stock on the record numbers from Q1? Probably not. What they should do, however, is focus on Tesla's long-term prospects. CEO Elon Musk believes the company could be producing 20 million cars per year by 2030, and it continues to build new gigafactories to support that goal -- it opened two last year, and just announced plans for another in Mexico.
By then, assuming that happens, the Q1 number will be nothing but a blip on the radar. Not to mention, Tesla is dominating the competition in areas other than electric vehicle sales, too.
The company has the most advanced fully autonomous self-driving technology in the industry. That creates a substantial financial opportunity for Tesla to sell the software to its existing customers, but it also paves the way for a fleet of autonomous robotaxis slated for release from 2024.
Ark Investment Management, run by renowned technology investor Cathie Wood, thinks that could be a $14 trillion opportunity as soon as 2027 -- and it forms the basis for the firm's lofty $1,533 price target on Tesla stock.
On top of that, Tesla plans to release a humanoid robot called Optimus by the end of this decade. It could reshape the workforce, particularly in industries like manufacturing, and the company estimates it could sell millions of units priced at $20,000 each.
Simply put, unlike its competitors, Tesla is on the path to becoming far more than just a car maker.
Tesla stock still looks attractive through a long-term lens
Tesla stock has soared 83% this year so far (and it's only April), and its price to earnings (P/E) ratio has climbed to 48.3 which is more than double the 18.1 P/E of the S&P 500. In other words, Tesla stock is significantly more expensive than the broader market, so scope for further upside in the short term could be limited.
On the other hand, the stock is still down 51% from its all-time high, and its P/E is well below its peak levels above 100. Through a long-term lens focusing on a five-to-10-year period, this could be a great buying opportunity as Tesla continues to grow, and executes on its futuristic ambitions.
