Growth stocks have taken it on the chin last year as a sharp rise in interest rates dampened sentiment for such companies.
Since then, several stocks have rebounded sharply after investors realised that they had been overly pessimistic.
One of these stocks was Tesla (NASDAQ: TSLA).
After touching its 52-week low of US$101.81 back in January this year, shares of the electric car manufacturer have shot up 78.8% to close at US$182.
It was an amazing rebound for a company that had faced production hiccups in Shanghai late last year and was issued four recalls for around 1.1 million of its vehicles from September to November 2022.
The latter was resolved via software update.
CEO Elon Musk was also caught up in a controversy as the new owner and CEO of Twitter, a social media company that he purchased for US$44 billion in October last year.
In light of these events, can Tesla’s business continue to do well and allow its share price to continue its momentum?
A sparkling set of earnings
At the end of January, Tesla released a record-breaking set of earnings for 2022.
The company also chalked up its highest-ever quarterly revenue, operating and net profits for its fourth quarter (4Q 2022).
For 2022, revenue jumped 51% year on year to US$81.5 billion.
Gross profit climbed 53% year on year to US$20.9 billion as gross margin hit a five-year high of 25.6%.
Tesla was also solidly profitable, turning in an operating profit of US$13.7 billion, more than double that of 2021’s US$6.5 billion.
Net profit soared 128% year on year to US$12.6 billion and the electric vehicle manufacturer saw free cash flow surge 51% year on year to US$7.6 billion.
Diversifying its vehicle mix
Meanwhile, Tesla’s vehicle production and deliveries have also crossed the one million mark in 2022.
For 2022, the company manufactured 1.37 million vehicles and delivered 1.31 million, a healthy increase from the 930,422 and 936,172 produced and delivered in 2021, respectively.
2022’s delivery numbers were also more than triple that of the 367,500 just three years ago in 2019.
These numbers demonstrate the increased demand for Tesla’s vehicles as the company rides on the trend of switching from internal combustion engines (ICE) to electric vehicles.
Building a new gigafactory
Tesla also envisions strong demand for electric vehicles and has decided to build its new gigafactory in Mexico.
The word “gigafactory” was a term coined by Tesla that refers to factories that produce electric batteries on a large scale.
These massive factories not only produce batteries for electric vehicles but they can also be used for other renewable energy storage applications.
The new Tesla gigafactory will be built outside Monterrey in Nuevo Leon.
However, a timeline for the new project has yet to be released but judging from the successes of its gigafactories in Shanghai and Texas, investors can assume that production can ramp up quickly once construction is completed.
Investor Day highlights
To add to the excitement, Tesla has also held its Investor Day recently where management laid out its “Master Plan 3” to focus on providing sustainable energy for the whole of Earth.
The company has presented an ambitious plan to greatly reduce the use of fossil fuels through various methods such as powering existing electric grids with renewable energy, switching to electric vehicles, and switching to heat pumps in homes and businesses, among others.
Tesla envisions a future where it can produce 85 million electric vehicles per year by 2030.
At this rate of increase, the company believes that the world can see a 100% sustainable energy future by 2050.
It also plans to reduce its manufacturing intensity by more than 40% with new manufacturing efficiencies, thereby halving the cost of producing a vehicle.
Tesla’s vision of a fully self-driving car is also tantalising as it seeks to tap into state-of-the-art artificial intelligence to solve complex problems and do route modelling.
It’s indeed a very bold version of the future that Tesla has painted, and it will take patience and efficient execution to make it come true.
Get Smart: The wind is in Tesla’s sails
After muddling through the recalls last year and shedding the controversy surrounding Twitter, Tesla looks ready to move ahead and do what it does best – produce cutting-edge vehicles that look sleek and save energy.
Not only has the company reported very strong financial and operating numbers, but it has also sketched out a plan for its future where technology can help it to achieve its goals.
Elon Musk is selling us his vision of the future, but it will take discipline and savvy execution to ensure that he does not stray from the path.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
