Tesla Stock Will Rebound in the Not-Too-Distant Future

Stock Market

Last month, excitement about its stock splits, and the expansion of U.S. electric vehicle (EV) tax credits, was enough to get investors fully charged up about Tesla (NASDAQ:TSLA) stock.

But so far this month, a cooldown in excitement (which I anticipated back in August) has played out. External factors like interest rates, inflation and the risk of a recession are keeping shares in the EV maker rangebound. This may carry on in the near term.

This doesn’t mean you should take a hard pass on Tesla. While it may not make another big leap immediately, shares stand to do so down the road.

Macro worries notwithstanding, the rapid adoption of EVs point to continued strong prospects ahead for this company, and for the stock. It may be getting close to exit the charging station. Let’s dive in, and find out why.

A Closer Look at TSLA Stock

Overall market sentiment explains why Tesla shares find themselves rangebound at present. While there’s still positive news coming out of the company (more below), it’s not enough to counter the above-mentioned concerns.

Again, this could continue for now with TSLA stock. More talk about a 2023 recession could result in it giving back some more of its August gains. So too, could further rate hikes by the Federal Reserve.

Rising interest rates will make more investors skeptical about whether it’s justified for shares to sport such a high earnings multiple. Right now, it trades for 69x forward earnings.

Yet while this may make investing in Tesla frustrating at present, this frustration may not last long. Unlike growth stocks overall, which may take some time to begin their recovery, a rebound for high-quality EV plays like this one could arrive much sooner.

EV adoption in the U.S. and in China (the largest EV market) keeps accelerating. This may end up outweighing the fallout from a recession. It may not be certain but, digging into the data, it’s reasonable to believe that this scenario will play out.

A Lot Points to Results Staying Strong

Doom and gloom headlines may have you concerned about growth for TSLA stock in the coming year. However, a look at EV sales trends suggests otherwise. Now at 5.3% of new car sales, U.S. EV adoption is occurring at a faster-than-anticipated rate.

This adoption rate is likely to continue climbing, as the expanded EV tax credit, courtesy of the Inflation Reduction Act, further bolsters demand.

The switch from buying gas-powered cars, to buying electric-powered ones, accelerated by the Federal Government’s financial incentives, may help counter the effect of belt-tightening among U.S. households.

Over in China, talk about a slowdown in the world’s second-largest economy may have you concerned that growth in Tesla’s key international market will take a big hit.

Yet just last month, Tesla saw a significant increase in deliveries and sales from its Shanghai gigafactory. With things at this facility firing on all cylinders, the EV maker is now operating at maximum production capacity.

This leaves it well-positioned to sell into demand, robust due to the big increase in EV penetration of the global auto market. All of this points to the company continuing to meet/beat expectations with its fiscal results.

The TSLA Stock Takeaway

Tesla stock continues to earn a B rating in my Portfolio Grader. It may not happen right this second, but a breakout may be around the corner for shares. One could occur within the next few months. Either when it next reports earnings in October, or when it reports full-year results in January.

Although this may not satisfy impatient investors, these are more promising prospects for other growth plays. Secular EV growth trends may enable it to deliver the results needed to sustain and grow its stock price.

Other high-fliers struggling right now may face a far longer timeline to a comeback. Instead of a mere few months, it could take a year, or even longer, to get out of rangebound mode, and back into high-flying mode.

TSLA stock remains an EV play worth holding onto, and a name to consider buying. Whether now or on further weakness.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

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