Tesla (TSLA -2.04%) shares have crushed the market this year, up 87% (as of Aug. 21). But they've taken a breather in the past month, down about 21% since their recent high posted on July 18. Investors seem to be digesting the latest financial results in a negative light.
This top electric-vehicle (EV) stock currently trades at about $230. Can it reach $300 per share by the end of 2023, which would translate to a 30% gain over the next four months or so? While the near term is always full of uncertainty, it's definitely in the realm of possibilities.
Beating analyst estimates
In each of the first two quarters of 2023, Tesla was able to exceed Wall Street analyst estimates for the top line, generating revenue of $23.3 billion and $24.9 billion in Q1 and Q2, respectively. Both figures showed year-over-year increases of greater than 20%, which is tremendous growth for the EV-industry leader. Tesla also delivered 889,000 cars in the last two quarters, compared to 565,000 in the first six months of 2022.
It wasn't all good news, though. Investors were disappointed with the company's latest margin trends.
Tesla's gross margin in Q2 of 18.2% was much lower than in the same period a year ago. This lower profitability was driven by ongoing price cuts that Tesla is implementing in order to push more volume and grow its market share.
The same story is happening in China. And now it looks like the EV market is going through some intense price wars that could make it difficult for Tesla to boost profits going forward.
It's not out of the question
Despite the company's recent mixed financials, a 30% rise in the stock price between now and the end of the year doesn't seem like a crazy outcome. Tesla shares have skyrocketed 2,220% in the past decade, so huge upswings are common. Moreover, the stock's all-time high closing price is just under $410, which was achieved in November 2021 (split-adjusted).
There are some catalysts on the horizon that could benefit Tesla's stock and shareholders. The business can once again exceed consensus analyst estimates when it reports third-quarter financials in October. And if margins show signs of stabilizing, it could be a boon for the stock price.
On the last earnings call, Tesla founder and CEO Elon Musk said that the company will start deliveries of its highly anticipated Cybertruck later this year. If this actually ends up happening, it could be a positive catalyst.
But the flip side is also true. If Tesla once again delays the start of Cybertruck deliveries and if margins were to further deteriorate, shareholders could punish the stock.
Macro uncertainty
Investors might be optimistic that the stock can change its course of the past month and finish the year strong -- hopefully hitting $300 per share. But it's not as clear-cut as that.
There's always a lot of uncertainty present when looking at the near term, but it seems like that's elevated today, given the condition of the economy. Whatever happens with inflation, consumer spending, unemployment, and the labor market will be key factors impacting what the Fed does.
Consequently, the macro environment can't be ignored, so investors should keep it in the back of their minds. From a fundamental perspective, Tesla could crush it during the rest of the year. The stock could still do poorly, though, due to weaker investor sentiment -- especially because it trades at a steep trailing price-to-earnings ratio of 66.
It's certainly possible that the stock hits $300 by year-end. But things could go the other way, too, and there's no way of knowing that outcome ahead of time. Therefore, the best thing that Tesla shareholders can do is adopt a long-term mindset.
