Tesla: Buy, Sell, or Hold?

Tesla's most recent report on production and delivery indicated that the company continues to make solid progress. In the second quarter, they manufactured close to 480,000 electric vehicles (EVs), and their deliveries soared by an impressive 83% compared to the previous year.

This is resulting in increases in analyst predictions for the value of the company's shares and expected earnings. However, Tesla's stock has more than doubled since the beginning of the year and has risen by almost 50% in the last three months. Investors may be deliberating whether this collection of circumstances indicates that it is the right time to buy, sell, or simply hold onto Tesla stock. Here are additional factors to ponder before making a decision.

Tesla's shares have continuously defied conventional valuation measures. However, despite strong earnings in recent times and a decline in stock prices, its price-to-earnings (P/E) ratio dropped to around the mid-20s earlier this year. Nevertheless, as the market and especially Tesla's stock recovered, the share price has once again reached excessively high levels.

Information about the PE Ratio of Tesla (TSLA) provided by YCharts.

This is because investors think there is still a lot of potential for Tesla to increase their profits. Despite the increasing number of electric vehicle manufacturers in the market, Tesla currently has around 60% of the market share in the United States. However, it is highly unlikely that they will be able to maintain such a large share for a significant amount of time. In China, where there is stiff competition in producing electric vehicles on a larger scale compared to the U.S., Tesla currently holds approximately 10% of the market share for battery electric and plug-in hybrid vehicles.

However, electric vehicles (EVs) continue to make up less than 7% of the U.S. car market. Consequently, despite facing increased competition from other manufacturers, Tesla may still achieve its goal of 50% annual production growth for multiple years. Following the unexpected positive results of the second quarter, the company has the potential to exceed its projected production of 1.8 million units by 2023. Although vehicle sales and earnings are expected to continue growing in the future, Tesla also has other revenue streams that are expanding.

Other Income And Services

Tesla has separated its energy division for investors to keep a close eye on. The income from generating and storing energy increased by almost 150% in comparison to the previous year, surpassing $1.5 billion in the first quarter alone. This accounted for about 6.5% of the entire company's revenue. Furthermore, this upward trend is expected to continue due to Tesla's significant investments in expanding its infrastructures in Nevada and California.

However, there is another category that investors should start focusing more on. Tesla refers to it as "services and additional income," which encompasses the company's Supercharger network. This division also experienced substantial growth compared to the previous year during the first quarter and accounted for approximately 8% of the overall revenue.

Ever since then, Tesla has made the decision to allow other car brands to utilize its rapid charging network. Companies like Ford, General Motors, Rivian, and Volvo have all come to agreements with Tesla, granting their customers access to the Supercharger network. Although the specific details of these agreements remain undisclosed, this move to share its exclusive charging network with others will undoubtedly boost revenue in this particular industry.

The ease and dependability of Tesla's Superchargers certainly influenced some people who were buying electric vehicles to choose Tesla. It's possible that this new approach will assist other companies in selling their expanding range of electric vehicles. However, if the popularity of electric vehicles increases as predicted by many experts in the industry, the positive impact should outweigh any advantages it provides to rival manufacturers. Investors should keep a close eye on Tesla's services division in the upcoming months and years to assess its role in driving the growth of revenue and earnings.

Investors who have a long-term perspective on Tesla's charging and energy businesses are especially interested in the additional opportunities they provide. It is important for investors to view Tesla as a long-term investment. However, if there are individuals who require immediate funds, it would be logical for them to sell some of their Tesla stocks considering its recent surge. On the other hand, for those seeking future profits, retaining or acquiring more Tesla shares is still a sensible decision at present.

Howard Smith holds investments in Rivian Automotive and Tesla. The Motley Fool holds investments in and endorses Tesla. The Motley Fool suggests General Motors and suggests considering the purchase of long January 2025 $25 call options on General Motors. The Motley Fool abides by a policy of transparency.