Why Tesla stock is in buy-the-dip territory

The Market Online

2 days ago

Tesla (NASDAQ:TSLA), at a market capitalization of US$1.17 trillion, is the most successful EV company in history, achieving a globally ubiquitous brand thanks to high-quality vehicles, growing market share, profits on the income statement, and a headline-garnering founder and chief executive officer (CEO) with no qualms about publicizing his polarizing worldview.
Tesla's profitable growth has rewarded investors with a 546 per cent return since 2020, though the stock is relatively flat since November 2021, reflecting uncertainty about Musk's antics, post-COVID and tariff-based inflation, lower profits because of decelerating EV demand, as well as the company's multi-pronged early-stage expansions into products and services beyond conventional EVs, including autonomous driving, robotaxis, energy storage.
This uncertainty, though rational given the macroeconomic circumstances, heavily discounts the strength of Tesla's operations and Musk's comfort with failure, equipping the company to transform at least some of its aspirations into shareholder value. Tesla's operational health
First, let's size up Tesla's operations. The company grew revenue from US$31.5 billion in 2020 to US$97.6 billion 2024, while growing net income by more than 10x from US$690 million to US$7.1 billion, respectively.
Though net income was cut in half from 2023 to 2024, reflecting higher R&D costs – which will likely remain elevated for the near future – Tesla expects these efforts to generate revenue on an accelerated basis, demonstrating cost-management in the interim by reducing the average cost of goods sold per vehicle from over US$38,000 in Q1 2023 to an all-time-low of under US$35,000 in Q4 2024.
The company is a cash-generating machine and has been clear about having a well-funded future, forecasting its vehicle segment to 'return to growth' in 2025 while holding 'sufficient liquidity [US$37 billion in cash] to fund our product roadmap, long-term capacity expansion plans and other expenses,' according to the Q1 2025 news release.
What lies between Tesla investors and a significant stock price re-rating then hinges on whether or not the company is able fortify its EV leadership position while pioneering its path to added value in its more experimental divisions. Here's a data-driven breakdown about why there's likely substantial upside for investors to capitalize on. Tesla's EV division
The main drivers within Tesla's EV division are the ongoing global EV tailwind and the company's ability to generate leverage beyond the sector's double-digit compound annual growth rate through compelling new vehicle models. Tesla Cybertruck in Miami, Florida, in 2024. (Source: Adobe Stock)
A number of these models, slated for production later this year, will offer consumers better affordability while using existing infrastructure, allowing for production to grow by an estimated 60 per cent year-over-year (YoY) to over 3 million vehicles.
Additionally, Tesla plans to begin production of its highly anticipated robotaxis in 2026, with initial plans to test 10 vehicles in Austin in June for up to 4,500 rides per month, according to data from Morningstar quoted in a Yahoo! Finance report.
Coupled with the company's Doja Supercomputer, designed for self-driving AI, Wedbush analyst Dan Ives believes autonomous vehicles and technology could earn Tesla in the vicinity of US$1 trillion in revenue. Tesla's energy storage division
Tesla's energy storage division, providing solar panels and domestic and commercial batteries, is growing rapidly and is expected to continue doing do thanks to the rising waves in global electrification and AI infrastructure. Tesla's Powerwall battery in an Oregon showroom. (Source: Adobe Stock)
The company sees energy storage deployments growing by a minimum of 50 per cent YoY in 2025, following record deployments and record gross profits of more than US$3 billion in Q4 2024, the latter up by 113 per cent YoY. This momentum is driven by the underlying technology's ability to capture energy during off-peak hours and deploy it on demand, granting Tesla a differentiated value-add in a competitive industry.
With eyes on long-term production stability, Tesla is also diversifying its supply chain away from China through new US lithium refining and cathode production plants set to begin production in 2025. Tesla's robotics division
Finally, we have Tesla's robotics division, which focuses on its Optimus humanoid robot, whose ability to perform unsafe or mundane tasks continues to improve, as recently highlighted by Q4 2024 upgrades to the robot's hands, locomotion and task database in anticipation of production kicking off by year-end. Tesla's humanoid robot, Optimus. (Source: Adobe Stock)
Musk believes Optimus is the first iteration in a US$10 trillion revenue opportunity that could see the robots deployed in commercial and domestic settings across the globe. Tesla will begin its go-to-market strategy by ramping up to a few thousand robots within its manufacturing facilities by the end of 2025, aiming for about one million operational units by the end of the decade. A global brand shaping the future of essential industries
Taken as a whole, Tesla is a bet on the future of technology aligning with the energy transition and the promise of AI to increase efficiency across the industry spectrum. Seeing as these catalysts will be part of the rest of our lives, no matter how the future plays out, the risk is well worth the potential reward, should the company get it right and evolve into a foundational role in how we consume power, get around and keep productive.
Conviction in this thesis only increases when we consider the company's US$37 billion in cash as of Q1 2025, its demonstrated capacity to generate billions more every year and Musk's long track record of innovation, which still holds sway despite his volatile personality.
This is why an investment in Tesla today locks you into evidenced-based, multi-trillion-dollar potential, revealing the stock's range-bound past few years, down 20-per-cent from its all-time-high in December 2024, to be nothing more than broader market hesitation at the pursuit of greatness, which will be a resounding success if only fractionally achieved.
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