I want to preface this article with something: I’m not a raging Tesla (NASDAQ:TSLA) stock bull. In fact, I could even go as far as to say that I am rather neutral on TSLA stock.
That’s not just because the stock has been in a lull or because it pulled back from its highs earlier in the year. That’s just how I tend to view the stock, leaning against the crowd as sentiment constantly shifts.
When nobody liked Tesla, I pointed out its strong assets like its charging stations, brand strength and industry-leading vehicles.
When everyone seemingly loved the stock earlier this year, I found it overvalued and thought the stock had rallied too far, too fast.
Perhaps that makes me too clueless on Tesla, but one thing is very clear: This is the top EV stock to buy.
If investors like EV and think it’s the future, well, there’s no way that’s happening without Tesla. It’s one of the largest companies in the country now, with a market capitalization of $680 billion. It’s without question the largest automaker in the world at this point.
Others Are Catching up, but Are They?
When Tesla began launching its electric vehicles, the rest of the automotive world was either going to adapt or it wasn’t. Put another way, Tesla would either succeed and thereby force the automotive world to shift from internal combustion engine (ICE) vehicles to EV, or Tesla would fail and traditional automakers would maintain the status quo.
Without saying it, I think most of the auto world thought Tesla would eventually fail and they could continue on with business as usual. That’s pretty clear given how late to the game everyone is and how the technology continues to lack.
Tesla critics will say the competition will blow it out of the water, but will they? Porsche dipped its toe in the water and Tesla’s Model S can still dominate. Porsche is an incredible automaker and according to critics, it would crush Tesla once it decided it wanted to dabble in the EV space.
In other words, critics treated Tesla like the little brother who would never beat big brother at sports. As if Tesla was merely entertaining EV fans until “real” automakers decided to get involved.
This isn’t a fluff piece for Tesla — I drive about the farthest thing from a Tesla, with a Jeep Wrangler. Trust me, I’m not afraid to say Tesla and CEO Elon Musk have had plenty of missteps along the way.
But now we have General Motors (NYSE:GM), Ford (NYSE:F), Volkswagen, Mercedes-Benz, countless startups and SPACs and everything in between entering the EV space. Guess who’s still on top?
That’s right — Tesla.
So even though these companies have billions in R&D power and even as some team up with each other, Tesla continues to churn out record results.
Record Deliveries Beget Record Results
On July 2, Tesla reported second-quarter deliveries of 201,250 vehicles. Analysts had a pretty wide range of expectations — between 180K and 230K — but the key threshold was about 200K.
Q1 2021 was a record deliveries quarter (ever, not just for Q1) and in Q2, Tesla topped that result by almost 20,000 units. All of that helped lead to a record second quarter of business later in the month.
On July 26, earnings of $1.45 per share beat expectations by 47 cents. Revenue of $11.96 billion grew 98% year over year and beat estimates by more than $550 million. Obviously, that year-over-year growth can be partly attributed to lapping last year’s Covid-19 impact. However, there’s no denying that Tesla obliterated expectations.
The company generated more than $1 billion in GAAP net income, while automotive gross margins climbed from 25.4% in the same quarter last year and from 26.1% last quarter, hitting 28.4% this quarter.
Put simply, this was a damn good quarter even though the bears want to tear it apart. Tesla’s sitting on $16.2 billion in cash, something the doubters never thought would happen. It’s more well-capitalized than its pure-play EV peers and many of its traditional automotive peers as well.
Bottom Line on TSLA Stock
Tesla has expanded from dominating in California, to dominating in the U.S., to dominating around the globe.
While competition continues to crop up in different regions and countries, Tesla’s expansion continues at a torrid pace. Its production plants continue to come online and new models are in the queue. The Cybertruck isn’t that far off, either.
The biggest differentiator, though? Energy.
Too many people have tried for too long to value TSLA stock as a traditional automaker. That’s not the only story and in fact, at some point, it could be the smaller of the two businesses.
The work that Tesla continues to do on the energy side — which spans from residential to critical infrastructure — could become monumental in the future. Does that justify its near-$700 billion market cap? Not to me, but who’s to argue with a cult following?
In the auto space, it continues to dominate and its fundamentals have improved dramatically over the years. Lastly, the chart looks okay. I like to blend fundamentals and technicals, giving about equal weight to both. When I look at a chart of TSLA stock, I see consolidation, not doom and gloom.
This stock is working off a tremendous rally, which nearly sent the stock to $1,000 — and that was after a 5-for-1 split last summer. Now chopping just below $700 resistance, Tesla is riding its 200-day moving average and continues to put in higher lows and lower highs.
On a push over $700, $780 could be next. Above $800 and we could see TSLA retest its highs near $900.
If the overall market rolls over and Tesla loses its 50-day and 200-day moving averages, $600 could be in play. Below $600 and perhaps $540 to $550 is on the table, which was support in March and May of this year.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.