Tesla is set to reap massive revenues from renewable energy industry. Solar energy will power TSLA stock going forward.
- Tesla stock has had impressive year-on-year growth since its IPO in 2010.
- Geopolitical factors and consumer demand will act as a huge catalyst for the stock.
- Tesla's entry into the solar market with a big acquisition couldn't have come at a better time.
Since its IPO in 2010, Tesla (NASDAQ:TSLA) has had short periods of volatility and also uncertainty about its viability as a game-changing company. Elon Musk’s ambitious projects had raised some eyebrows on the Wall Street. However, recent developments and geopolitical factors (more on those later) show that investors were right to stick with the company.
Since Tesla’s IPO, the stock has enjoyed remarkable growth, more than 1000% in just six years. Bears have been taken aback by the “hype” surrounding Tesla. Admittedly, they aren’t the first company to develop electric cars. However, Tesla is the first company to develop compelling consumer vehicles and make charging seamless.
A Strong Brand
Tesla's "Model 3" generated a record-breaking $10bn worth of pre-orders in just 2 days. This shows that Tesla doesn’t just make innovative vehicles, but also has big brand power, and more importantly, customers trust them with their money. In fact, most of the 200,000 people who paid deposits for the Tesla Model 3 hadn’t even taken it for a test drive, or even knew what it looks like. That is unheard of in the automotive industry.
Also read: A Short Squeeze Can Drive TSLA Stock Higher
Trump’s election victory is one of the factors which is likely to spur growth. Notably, he is very pro-business and has repeatedly stated how he plans on reducing corporate tax and increasing jobs. In a rather telling move, Trump appointed Tesla CEO, Elon Musk, to the Strategy and Policy forum. This forum consists of top business leaders who President-elect Trump can call on for advice. Tesla is well-placed to increase revenue due to a more “lax” and freeing business environment under Trump.
Saying that, Tesla's biggest growth driver is its foray into solar. Tesla acquired Solar City in Q4 of 2016 in a timely manner. For instance, demand for solar had a compounded growth rate of 60% over the past ten years. This has largely been fuelled by a 60% drop in the cost of solar installation. Moreover, the growing eco-friendly trend means that there is a great interest in renewable sources of energy. Tesla’s acquisition of Solar City would allow it to produce solar solutions by leveraging impressive economies of scale and utilizing Solar City’s distribution network.
In November of 2016, Elon Musk announced “Solar roofs” at a media event in the Hollywood hills. Instead of having a solar panel on part of the roof, the “Solar roof” replaces the entire roof for maximal energy generation. The announcement of this neat, Apple-eque-tight-integration has been well received by consumers. Elon Musk also stated that he wants to create a one-stop shop for consumers. In the near future, customers would be able to walk into a Tesla showroom and walk out with a Tesla vehicle, Solar Roof, and power charger.
A foray into the home is of increasing importance for tech companies and Tesla is set to do it on a massive scale.
Revenue In Right Direction
Tesla’s Q3 2016 results beat analysts’ estimates with style. Revenue came in at $2.3 billion- $400 million more than analysts expected. Moreover, in an unexpected turn, Tesla showed a profit of $111 million, or $0.71 per share. Analysts expected them to show a loss of about $0.54.
Tesla is moving in a positive direction with regard to revenue, innovation, brand power and leveraging consumer trends. Fortunately, the factors which contributed to their growth is set to continue long into the future.
In conclusion, Tesla is set to reap massive revenues from the industry which powers every other one: energy. Furthermore, all the factors are in its favor. So the question “Should I add Tesla to my portfolio?” is a wrong one. What you might want to ask is “Can I afford not to?”
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