The bear market within the expertise sector has been brutal to firms like Tesla (TSLA 3.20%), which have traditionally traded at valuations properly above inventory market norms. 

Amid the carnage, Tesla inventory had three-quarters of its worth worn out from peak to trough, however it’s off to a red-hot begin in 2023 with a 38% achieve as of this writing. Its 2022 full-year monetary outcomes (launched Jan. 25) helped to reignite traders’ urge for food, particularly as CEO Elon Musk was significantly upbeat on the corporate’s prospects for 2023.

Tesla inventory could already be a prime performer thus far this 12 months, however this is why it is nonetheless a screaming purchase.

2022 was a monumental 12 months for manufacturing, and 2023 may very well be even higher

Tesla underwent its largest growth in its historical past in 2022 with the opening of two new gigafactories, one in Austin, Texas, and the opposite in Berlin. They be part of the present services in California and Shanghai, and have doubled the corporate’s manufacturing capability to 2 million electrical autos per 12 months.

Tesla is working to ramp up its new vegetation and managed to extend manufacturing 47% 12 months over 12 months to 1.37 million vehicles in 2022. However 2023 may very well be the 12 months Texas and Berlin function nearer to full capability with about 1.8 million models on the playing cards, based mostly on the corporate’s most up-to-date steerage. Elon Musk has stated Tesla might even hit two million vehicles if there are not any exterior interruptions.

That will imply manufacturing development above Tesla’s bold annual goal of fifty%, which the corporate expects to fulfill yearly for the foreseeable future.

However 2023 might convey additional progress on the growth entrance. Tesla simply introduced a $3.6 billion overhaul for its manufacturing unit in Nevada, the place it produces battery packs and different electrical automobile parts. The plan options two new services on the similar location that can enhance current capability for batteries and parts, plus function the primary manufacturing hub for the brand new Tesla Semi truck, which started delivery in late 2022.

Tesla might hit a symbolic income milestone in 2023

Tesla’s income development has been simply as spectacular as its manufacturing development throughout its rise to the highest of the electrical automobile trade. However in 2023, analysts are predicting income will cross $100 billion for the primary time within the firm’s historical past.

Whereas that may be an incredible achievement, it might mark a slowdown in top-line development to only 31% in comparison with 2022, when income rose 51%. Given the fast development in automobile manufacturing and gross sales, how is that doable? Effectively, Tesla has been slashing costs on its vehicles, and analysts are factoring that into their calculations.

Notably, the fourth quarter introduced margin compression, which is a pure consequence of value cuts. Tesla’s automotive gross revenue margin got here in at 25.9%, about 470 foundation factors decrease than the year-ago interval. That is also a drag on its earnings energy.

With that stated, on the fourth-quarter earnings name, Musk instructed traders prospects are presently ordering autos twice as quick as Tesla can produce them, and January’s order quantity was the strongest within the firm’s historical past for this era. Because it seems, value cuts are having an exceptional influence. Analysts’ income estimates for 2023 would possibly show to be too low.

Tesla is a long-term story

It is tempting to give attention to the newest quarterly or annual outcomes, however Tesla has a lot extra to supply. By 2030, Musk envisions an organization producing 20 million electrical autos with the assistance of not less than 10 further gigafactories, so the following few years may very well be very busy when it comes to growth.

It is also vital to give attention to Tesla’s different companies like its solar energy and battery storage phase, which generated $3.9 billion in income throughout 2022. The corporate deployed 6.5 gigawatt-hours of storage for the 12 months, up 64% from 2021 and up 528% since 2018.

However considered one of its largest alternatives may very well be realized towards the top of the last decade. Tesla plans to mass produce a humanoid robotic, referred to as Optimus, by 2027. With a price ticket of $20,000, this may very well be a multibillion-dollar windfall that might change manufacturing and low-skill labor perpetually.

On the electrical automobile entrance, Tesla is about to unveil a brand new mannequin at its investor day on March 1, which might assist the corporate preserve a long-term edge over its rivals.

Regardless of the good run in Tesla inventory 12 months so far, its ahead price-to-earnings (P/E) a number of remains to be below 30. Whereas that is a premium to the tech sector common — represented by the Nasdaq-100 index, which trades at a ahead a number of of 23 — it is nonetheless considerably decrease than the valuation the inventory commanded in 2020 and 2021 when it approached 100.

So, for all of Tesla’s progress and potential, traders can nonetheless choose up the inventory at a gorgeous value.