Friday, February 23, 2024
Stock Market

Tesla Stock Could Get Booted From the Mag-7. Buy It Anyway. Here’s Why.

You waited for a pullback in TSLA stock and now you got it, so quit worrying and start investing

Source: Roschetzky Photography / Shutterstock.com

Electric vehicle manufacturer Tesla (NASDAQ:TSLA) might not stay in the prestigious “Magnificent Seven” or “Mag-7” club much longer. Tesla is out of favor for the moment, and you may be tempted to get rid of your shares. Don’t let temporary sentiment shifts cloud your TSLA stock outlook, though. Indeed, I’d say now is the time to buy what the worry warts are selling.

Sure, Tesla has its fair share of challenges. As we’ll discuss in a moment, an analyst just downgraded Tesla stock. The reward-to-risk balance is favorable and volatility-tolerant investors should stay in the trade for the long haul.

Excuses to Sell TSLA Stock

Because the financial press always places Tesla under the proverbial microscope, investors can always from excuses to sell Tesla stock. For example, Tesla’s fourth-quarter 2023 revenue came in at $25.1 billion, up 3% year over year.

Some stock traders might not feel that 3% revenue growth is good enough nowadays. However, I suspect investors can be too demanding nowadays, insisting on blockbuster sales growth every quarter.

Another excuse to sell TSLA stock is a recent Bloomberg report that hints at potentially imminent Tesla layoffs. More precisely, the report stated that Tesla “managers were asked to affirm whether each of their employees’ positions is critical.”

What some people will surely miss is that Tesla has, according to the same Bloomberg report, “roughly doubled its workforce since 2020.” So, even if Tesla lets some workers go, this ought to be expected after a bout of over-hiring activity.

‘Giga Berlin’ Construction Is Back on Track

Now moving on to the good news, Tesla is restarting construction of the company’s “giga-factory” in Berlin, Germany. As you may recall, construction was paused because of disruptions in the Red Sea.

If you want to sell your TSLA stock because of possible Tesla layoffs, consider this. If Tesla is in such terrible condition, would the company be building a gigantic EV-production factory now?

Tesla’s problems in China might be subsiding. I say that because Tesla’s EV sales in China increased by around 8% YOY in January 2024 (according to a Barron’s report).

Again, some folks won’t be impressed with 8% sales growth because only blockbuster sales figures are acceptable anymore. Just bear in mind, though, that Tesla must take baby steps forward in China’s highly competitive EV market, which isn’t always friendly to U.S.-based automakers.

TSLA Stock Outlook: Bullish Whether It’s ‘Mag-7’ or Not!

The Tesla share price went down in early 2023 and the company fell out of favor for a moment. Tesla could get kicked out of the “Mag-7” at some point this year as a result.

This actually makes my TSLA stock outlook more optimistic, not less. People sometimes ask for the market to give them a share-price dip, but then they don’t take advantage of the opportunity.

I encourage investors to consider taking a share position in Tesla while the skeptics, as usual, look for excuses throw in the towel.

On the date of publication, David Moadel 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.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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