Lynch Picks: Buy Tesla (TSLA)
Without a doubt, Elon Musk and Tesla made electric automobiles popular. Although there were other EVs before $TSLA (they have been around for about 200 years), the Roadster's battery range, speed, acceleration, and affordable pricing revolutionized the auto industry.
With a 64% market share as of the third quarter's end, Tesla is still in the lead of the electric vehicle market thanks to its first-mover advantage. Even while it's a decrease from the 75% it withheld in the first quarter, this is a typical result of many new competitors joining the market.
Despite the anticipated increase in demand for EVs, there are several obstacles that Tesla and other manufacturers will need to overcome to achieve their objectives. First, tax credits support demand, and if they go, sales may suffer. Although the so-called Inflation Reduction Act, passed in August, introduced a new set of incentives for the following few years, it might not be prudent to continue them indefinitely.
Next, with so many electric vehicles coming in to charge, the electrical grid will be highly taxed and require renovation. Due to the high expenses associated with power generation, transmission, and storage, achieving that goal could not be practical or affordable. This past summer, California asked EV owners to refrain from charging their vehicles to contribute to energy conservation while announcing a ban on fossil fuel-powered vehicles by 2035.
Source: Photo by Makara Heng from Pexels
While efforts are being made to find alternatives to upgrading and reworking the electric grid and employing other materials to power EVs, automobile manufacturers may find achieving the growth they anticipate challenging.
To finance his acquisition of Twitter, Musk has also been selling Tesla stock. In November, he sold 19.5 million shares, and in December, he sold another 20 million. However, over the long term, Tesla isn't going out of business and still has a lot of room to develop. But for its shares to reach a $1 trillion valuation, its worth would need to nearly triple. Although that sounds conceivable, investors might have the patience to wait a few years for that to happen. $TSLA has plunged nearly 70% YTD, and finally, the stock justifies a buy rating.
Source: Yahoo Finance