Tesla (TSLA -3.49%) shares have climbed 186% and 2,710% in the past five- and 10-year periods (as of Oct. 10), respectively, monster gains that have been driven more by the market buying Elon Musk's vision than looking at the company with a rational view. This is clearly a story stock.
This business gets a lot of attention based on what it could become one day. Tesla shareholders should instead focus on the present situation. Here's one key number to keep an eye on.
Image source: Tesla.
Tesla is still a car company
Investors must keep tabs on the company's automotive gross margin. This important metric indicates Tesla's pricing power and the health of the core operating activity, which is selling electric vehicles (EV) to customers around the world.
During the second quarter (ended June 30), Tesla's automotive gross margin was a reported 17.2%. This was down considerably from 28.5% posted in 2022, Tesla's most profitable year ever.
The industry is becoming more crowded
For a long time, Tesla dominated the EV market. But now, it faces stiff competition from domestic and international EV makers, which will make the next decade much more difficult for achieving strong growth than the last 10 years. The business has cut prices to spur demand.
Tesla is also showing just how sensitive it can be to macroeconomic factors. While its past revenue gains mimic a software company's trajectory, the last couple years resemble a traditional car maker whose financial success is heavily influenced by the broader economy. This isn't a positive characteristic.
