If you've wanted to own Tesla (TSLA -1.11%) shares but thought the stock was too expensive, you now have your opportunity. The stock had doubled this year as sales and profits have continued to grow for the electric vehicle (EV) juggernaut.
But a correction in Tesla's share price is under way. For those willing to withstand short-term headwinds, the market may now be providing a great opportunity to own Tesla. The stock's correction gained traction after Tesla recently updated investors with its third-quarter operational and financial results. Here's a look at those results.
Tesla missed analyst expectations in the third quarter.
A rare market opportunity
No company is going to march through every macroeconomic or competitive environment without ebbs and flows in the business. Some investor expectations aren't realistic, and that presents opportunity for those with patience and long-term time horizons. Those opportunities are more rare for popular companies like Tesla, for whom investors have high hopes for massive future growth.
Those high hopes, though, lead to high valuations in that type of stock. Though vehicle sales continue to grow strongly at Tesla, its revenue and net income have taken a hit this year as the chart above shows again for the third quarter. That's because CEO Elon Musk has chosen to lower prices and work to keep market share even at the expense of near-term profitability.
Yet the stock's correction is providing investors a good chance to own the EV leader. While still at a lofty valuation compared to the overall market, Tesla shares were recently trading at a historically low price-to-earnings (P/E) ratio.
TSLA PE Ratio data by YCharts
Multipronged growth story
That makes now a good time to buy Tesla shares if one believes in the company's growth story. That story includes more than just the 50% annual vehicle production increase the company is aiming for.
A future with more renewable energy in use will require storage capacity to smooth out the uneven output from solar and wind energy sources. Tesla's battery storage segment is working to fill those needs, and its growth is notable. Tesla is investing to increase capacity, and storage deployed in the third quarter hit another record for the company.
Energy generation and storage brought in more than $1.5 billion in sales in the third quarter. Data source: Tesla. Chart by author.
Tesla's energy segment generated about 7% of total sales in the most recent quarter. And the company has other opportunities as well. Tesla's North American Charging Standard (NACS) plugs are now being adopted by competing automakers. Investors don't yet know how much that could end up adding to Tesla's revenue, but it's worth watching.
And there is a new revenue stream where investors are seeing real numbers. Tesla is now competing with charging network companies by selling charging hardware, too. This week, energy giant BP announced a $100 million deal to purchase Tesla fast-charging units. BP will deploy them at company brands including truck stop operator TravelCenters of America.
That marks another new growth area for Tesla. The EV growth story will have its ups and downs. But as global car buyers continue to migrate in that direction, Tesla looks to continue to be the dominant supplier. That makes the recent stock price correction a great time for long-term investors to add shares.
