Tesla (TSLA 1.98%) has long been a magnet for investor attention on the stock market, and that has historically played toward the company's advantage.
The brand and the stock, arguably have a cult-like following by devotees, many of whom are big fans of CEO Elon Musk as well. Tesla's avid customer base and its history of innovation and bucking long odds have also helped the company earn an unusually high earnings multiple for an automaker.
Tesla finished 2023 with a price-to-earnings ratio of 80 and a market cap of nearly $800 billion. The stock jumped 102% in 2023, but that performance was more due to excitement over artificial intelligence (AI) rather than the performance of the business itself, which featured slowing revenue growth and declining profits as the company cut prices on its vehicles to gain market share in an increasingly competitive electric-vehicle (EV) environment.
Heading into 2024, Tesla bulls are probably expecting another winning year from the stock as interest rates are expected to fall, rival automakers such as GM and Ford are pulling back on EVs, and Tesla just hit its full-year 2023 delivery guidance of 1.8 million vehicles. In 2024, the company should also benefit from the recent launch of the new Cybertruck and, potentially, new developments in artificial intelligence as Tesla is expected to eventually allow its vehicles to be driven autonomously and to develop a fleet of robotaxis that will be designed solely as ride-sharing vehicles without steering wheels or other components that a human driver would use.
One question on a lot of investors' minds is if Tesla will reclaim its status as a trillion-dollar company. That would require a 27% gain this year. That would be reasonable, but it's certainly not guaranteed.
Let's look at Tesla's prospects for 2024 to see if the stock can top the trillion-dollar mark again.
Image source: Tesla.
What to expect for Tesla in 2024
Tesla hasn't yet issued guidance for 2024, but we can get a sense of where the company is headed in 2023 based on its recent results.
Tesla finished the fourth quarter with 484,507 deliveries, 461,538 of which were Model 3 and Y vehicles. For the year, it delivered 1.809 million vehicles, just over its target of 1.8 million, and it produced 1.846 million.
In 2020, Tesla announced a goal of increasing its production by a compound annual growth rate of 50%, and the company fell a bit short of that goal in 2023, though Elon Musk had previously stressed that that was a long-term average figure and not a target it will hit each year. Deliveries in 2023 rose 38%, while production was up 35%.
That's not a problem for Tesla in and of itself, but its sequential production growth in 2023 has been modest as well. It delivered 423,000 vehicles in the first quarter, meaning production grew just 15% from Q1 to Q4.
Predicting the company's deliveries in 2024 is difficult, but it's likely to fall short of 2.7 million, which would be its 50% target. The company is expected to produce up to 150,000 Cybertrucks, but it doesn't have any new vehicles or factory openings to support that growth. Tesla did have a substantial amount of scheduled downtime at its factories in 2023, which could allow for more production in 2024, but most estimates call for 2 million to 2.5 million deliveries this year, which would represent solid, but not outstanding, growth.
Can AI save the day?
Vehicle deliveries are likely to be the primary determinant of revenue and profit for Tesla in 2024, but investors will also be focused on developments in artificial intelligence. Ark Invest's Cathie Wood, for example, expects Tesla stock to gain roughly 700% by 2030 as robotaxis emerge as its primary revenue stream, and the company's bipedal autonomous robot, Optimus, also has the potential to invent a new category in AI.
Tesla has thus far played coy with its AI projects, giving investors little information on when its developments might be monetized or when full self-driving will be fully available, but any progress on that front could juice the stock in 2024.
NASDAQ: TSLA
Key Data Points
Will Tesla cross the $1 trillion mark?
Tesla has the potential to grow revenue and profits by 27% or more in 2024, but in order for the stock to cross the trillion-dollar mark, it will have to continue earning a premium from investors, which means it will either have to exceed analyst expectations or make significant progress in AI.
Otherwise, the stock will be dependent on the same bullish sentiment that propelled it higher in 2023. While that could persist, over the long term, the company will need to deliver real profit growth and technological innovation for the stock to keep moving higher, as much is still expected from Tesla at its current valuation.
